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Oil, steam and natural gas pipelines run through the forest near Cold Lake, Alta. (TODD KOROL/REUTERS)

Oil, steam and natural gas pipelines run through the forest near Cold Lake, Alta.

(TODD KOROL/REUTERS)

Schizas’ Mailbag

Charts signal trouble ahead for energy services stock Add to ...

Hey Lou,

What are your thoughts on Macro Enterprise? What is causing this major drag back? This stock has been down for months and hasn’t recovered. It has a great future but the current share price isn’t very pleasing.

Thank you so much!

Kevin

Hey Kevin,

Thanks for the assignment.

This will be the fourth time since March of 2013 that I inspect the situation surrounding Macro Enterprises Inc. The last occasion was on Nov. 20, 2013, when the shares were trading for $6.25. Dave wanted to know if there was upside potential for the stock as it approached the release of its third quarter results. The research conducted on his behalf indicated that the momentum indicators were pointing towards more selling pressure.

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Unfortunately MCR has had to endure a sustained sell-off over the last three months which may be attributed to the outlook provided in the management discussion and analysis released with the third-quarter results. Management didn’t foresee higher activity in their primary geographic area in northeastern British Columbia unless there was significant progress made on some of the proposed liquefied natural gas projects slated for the province.

Another probe of the charts will help determine how best to manage aspects of this investment.

The three-year chart contains a number of features that need mentioning. The first item is the topping that we can see as the stock hit resistance near $7.25. The second pattern is the breach of support along the 50-day moving average. The third feature is the breach of the uptrend line that had supported the advance through 2013. Finally the MACD and the RSI both generated sell signals starting in October of 2013.

The six-month chart provides a close-up of the decline that started in December. Currently the stock looks to be headed to a test of support along the 200-day moving average near $5.00. In addition, the the momentum indicators are not signalling a trend reversal .

I would advise caution with MCR. There isn’t much support below the 200-day moving average which may lead to a retest of support at $4.00. The next quarterly report is scheduled for early March and given that the company doesn’t generate a lot of news that looks like the next likely flex point. Monitor the MACD and the RSI to see if the stock might catch a bounce off support but watch for resistance along the 50-day moving average on the upside.

Make it a profitable day and happy capitalism!

Have your own question for Lou? Send it in to lschizas@globeandmail.com.

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