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A drilling rig (Gord Pitts/The Globe and Mail)
A drilling rig (Gord Pitts/The Globe and Mail)

Schizas’ Mailbag

Don’t jump into this oil producer just yet Add to ...

Hi Lou,

I would appreciate your current view on PetroBakken Energy.

Thanks,

Paul

Hey Paul,

This will be the eighth time that I conduct an analysis of PetroBakken Energy Ltd since Jan, 3, 2011.

The last time was on March 21, 2012, when the shares were trading for $17.00. Bart was concerned about his investment in the company and wanted to know if he should take profits and if there was strong support for the stock. He was advised that if he felt it was time to sell – that he should go with his gut! When you sell and capture profits it provides a window of clarity where you can make another decision based on the new information that becomes available while you are in cash. If the stock goes down after you have sold you can wait for a new buying opportunity. If it continues to climb you can decide if you want to get back on the ride.

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It was also mentioned that reviewing your holdings on a daily basis is required. Things change and you have to react to the signs you find along the trail. Another study of the charts will provide an update on the opportunities and risks associated with this investment.

The three-year chart indicates that by April of 2012 the uptrend that had started in October of 2011 was coming to an end and that it was time to re-evaluate the case for PBN. By mid April of 2012 the 50-day moving average was breached providing another call to action. April was also the month that the RSI and the MACD signalled a shift in momentum towards increased selling pressure.

There was an advance that started off the May 2012 low of $10.79 which ran to a high of $15.01 on September 17. After that, selling came back in, taking the shares to a 52-week low of $8.67 on Jan. 21, 2013.

The six-month chart provides a close-up of the September top at $15.01 and the consequent decline. The MACD and the RSI both generated sell signals at the same time. By early October the shares breached support along the 50- and 200-day moving averages. Later in the month a death cross surfaced at $12.50. All of these patterns if ignored or not noticed would have produced a destruction of capital.

The RSI and MACD seem to be attempting to turn higher but not in a convincing way. At this point there are too many negatives to suggest putting your capital at risk.

Make it a profitable day and happy capitalism!

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

 
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