Vermilion Energy Inc. not about to reverse the downtrend

Aug 10th, 2015 – Comment

There is a trade setting up but expect resistance to come in near $48.00.


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VET LOGO

Hi Lou,

I have owned Vermillion Energy a couple of times since 2009 but do not own any right now. I am looking for an entry point so I can put this in my RRSP for my retirement income.I am 63 and retired.

I would appreciate your opinion.

Thanks

Gerard

 

Hey Gerard,

Thanks for the assignment. This will be the second time since 2010 that I investigate the patterns on the charts for Vermilion Energy Inc. (VET TSX). The last occasion was on July 14, 2010 when the trust units were trading for $34.19. Long time readers Doug and Irene from Kelowna, British Columbia wanted my opinion on the pending conversion of VET from a trust to a dividend paying corporation.

The research indicated that the conversion to a corporation was already backed into the price. The units were testing support along the 200-day moving average which was interpreted as a sign of investor willingness to buy on weakness. VET was trading in a range with support at $33.00 and resistance at $36.00. It was advised to not over react to the conversion and enjoy the 6.7% yield.

In retrospect that was the right call. The units started a new leg up in September of 2010 and ran to $50.43 by February of 2011.

Another examination of the charts will help identify the trend, support, and resistance associated with this stock.

 

VET

The three-year chart indicates that VET is struggling with a monster downtrend that started when oil began its retreat in June of 2014. The stock broke below the uptrend line and the 50-day moving average in the same month and then breached the 200-day moving average in September of 2014. By October a death cross surfaced and the shares faced resistance along the 50-day moving average for the rest of the year.

VET found a bottom in December of 2014 and spiked towards resistance along the 200-day moving average in early March of 2015. Resistance along the 200-day moving average has been a theme throughout the year.

 

 

VET2

The six-month chart illustrates the bounce out of an oversold situation which retested lows not seen since 2011. At this point the question is if the move higher have more in it. Energy companies move on increased production and higher prices for what they harvest. VET has had success in finding and developing energy plays in Europe which gives them opportunities to reap significantly higher prices for natural gas on a potential increase in volume. The issue is when and how much volume they get from their European ventures.

At this point it would be premature to move on anticipation of a trend reversal. There is a trade setting up but expect resistance to come in near $48.00.  Given that you have traded the shares a number of times perhaps that is the approach you should continue to follow until there is better evidence of a trend reversal.

Next time I will inspect the shares of Enerflex Ltd. (EFX TSX)  for Ken.

Make it a profitable day and happy capitalism!

 

 

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