Africa Oil Corp. looks to have more in the tank

Nov 23rd, 2012 – Comment

The ascending triangle pattern is a good thing but it is not a guarantee. Don’t shoot this running horse but make that you are ready to take action when required.


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Lou,

What is the story on AOI

Thanks,

Robbie

 

Hey Robbie,

Thanks for the assignment. This will be the second time that I analyze the case for Africa Oil Corp. (AOI TSXV). The first call to action was on April 11, 2012 when the shares were trading for $3.56. Brian who self identified as a rookie investor wanted to know what I thought about the shares of AOI. The research that I conducted at the time identified a company that had a huge land position in East Africa, a cashed up balance sheet, and was using Full Tension Gravity Gradiometry to identify drilling targets.

It was observed that the shares were holding support at $3.50 after pulling back from $4.50. It was advised that if you owned the stock it might be wise to throw to cash until there was more visibility as to the direction and likewise if you were thinking of buying that waiting for a return to an uptrend would be prudent. I may have been too conservative with that call given that the shares took off like a rocket to a 52 week high of $11.35 on May 28 as the company reported on some of its drilling activities. What has me concerned at this point is that all the drilling and exploration has reduced the amount of cash on hand and yet there have been no reports of oil flowing.

A second run at the charts will assist in getting a better handle on the opportunities and risks associated with AOI.

 

 

The three-year chart illustrates the massive run that started as the shares moved off their 52-week low of $1.36 on November 25, 2011. There is also an ascending triangle forming which is a continuation pattern. If the stock can overcome resistance that has formed around $11.00 it would suggest that there is more to the advance.

 

 

 

 

 

 

The six-month chart provides a close up of the resistance that has formed at $10.75 and the support along the uptrend line and the 50-day moving average. The MACD and RSI are not currently providing much in the way of guidance. The fact that I may have been too conservative in April doesn’t mean I am going to throw caution to the wind. As with all live positions in the the market you have to be ever vigilant for breakouts and breakdowns. The ascending triangle pattern is a good thing but it is not a guarantee. Don’t shoot this running horse but make that you are ready to take action when required.

 

Make it a profitable day and happy capitalism!

 

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