Thanks for the assignment. You are not the only one with deep concerns about their investments in Talisman Energy Inc. (TLM TSX). The company has been attempting a number of strategies to unlock shareholder value but so far with little success. Most recently there were takeover talks with Repsol S.A. that have fallen off the rails and which is now circulating as a potential sale of certain TLM assets. Never a good thing for shareholders when a strategic alternative goes from a takeover to just cherry picking the portfolio now that the evidence in the data room have been vetted. There is also the pending changes in management as CEO Hal Kvisle is believed to be stepping down.
This will be the third time that I examine the charts for TLM. The last was on May 14, 2012 on a request from Greg. The outcome of that analysis was that the stock was too weak to chase and that it might drop to a retest of support at $9.19 from the closing value of $10.86. Retrospectively that is exactly what happened.
Another investigation of the charts will help identify how best to manage this investment.
The three-year chart delineates the support at $10.50 that had been enforce since late 2012. Unfortunately the break below $10.50 in early September of 2014 signalled that lower lows were in the offing. The MACD and the RSI both indicated that sellers were taking control of the market as investors reacted to the news that the Repsol deal was coming apart like a cheap suit. What is worth mentioning is that the retreat from $10.50 happened quickly but not instantly. Astute investors had the opportunity to preserve capital over several weeks if they were able to react to the indicators that were screaming sell.
The six-month chart isn’t presenting a lot of positive signals that would suggest that a trend reversal is imminent. The MACD continues to point to more selling pressure and although the RSI is indicating an oversold situation that alone is not enough to prompt investors to buy.
Weak prices for oil and natural gas are also putting a caution flag on the track when it comes to a potential recovery for this hurting cowboy. If we get another polar vortex it could drive natural gas prices higher and pull TLM out of this dive. As with all weather related outcomes if is the operative word.
Make it a profitable day and happy capitalism!