Calfrac Well Services Ltd. caught in a relentless decline

Aug 21st, 2015 – Comment

Fracing was hot and now it’s not


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Lou Schizas is an equities analyst, investor, entrepreneur, professor and television and radio personality – and a true believer in the happiness-inspiring powers of capitalism.


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CFW LOGO

Good morning Lou,

 

I have held Calfrac for the last 2 and a half years, on and off, and until recently had done quite well with it. I am currently sitting on a small amount that has been killed and am wondering if it is time to get some more. I am going to ride it out with what I have but having cut their dividend already and riding at a 6+ year low…. Just wondering your thoughts.

 

As always, I appreciate your viewpoint.

 

Gordon

 

 

Hey Gordon,

Thanks for the assignment and your kind words. Both are greatly appreciated. This will be my first analysis of Calfrac Well Services Ltd. ( CFW TSX). The company provides hydraulic fracturing and other well stimulation services to clients in Canada, the U.S., Russia, and Latin America.

CFW is leveraged to the shale plays that have been in the crosshairs of OPEC’s open taps policy aimed at drowning non-OPEC producers in a sea of oil. Management teams in the oil patch have been cutting their capital budgets, laying off staff, and slashing dividends in response to their eroding revenue. Service firms suffer greatly as their customers reduce their activities.

A study of the charts will help identify  what we might anticipate with this stock.

 

 

CFW

The three-year chart illustrates a stock that had enjoyed a nice advance that started in November of 2012 when the shares were trading for $10.00 but topped out near $21.50 in late July of 2014. Since then its been a case of an aggressive trend reversal. In early July the MACD and the RSI generated sell signals that by early August saw CFW break below the uptrend line and the 50-day moving average.

In September of 2014 the pain continued as the shares breached the 200-day moving average. The shares rapidly declined to find a thin ledge of support at $13.00 but by October of the same year a death cross formed.  A bearish crossover demands that investors review their investment thesis in the face of sustained selling which has been evident through most of 2015.

 

 

 

 

CFW2

The six-month chart depicts the sell signals generated by the MACD and the RSI in April of 2015 as CFW traded close to $11.00. From there investors experienced another grinding retreat as the shares were beaten,battered, and burned in a whirlwind of selling.

There are no signals that we might expect a trend reversal in the near term.

 

 

Next time I will examine the charts for Pretium Resources Inc. (PVG TSX) for Peter.

 

Make it a profitable day and happy capitalism!

 

Categories: Oilfield Services
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