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A portion of the Shell Albian Sands oilsands mine is seen from an overlook near Fort McMurray, Alta.. (Jeff McIntosh)
A portion of the Shell Albian Sands oilsands mine is seen from an overlook near Fort McMurray, Alta.. (Jeff McIntosh)

Stock Trends

Soaring crude prices present an oil patch opportunity Add to ...

The Stock

Canadian Oil Sands Ltd.

The Trend

Rising energy prices hit hard at the world economy, testing the limits of corporate profitability and taxing the wallets of consumers. Like all taxes, they force a misallocation of resources and disrupt the economy.

Investors, of course, must navigate these disruptions. Determining the consequence of $100-(U.S.)-a-barrel oil is now a full time occupation for many money managers.

More related to this story

Over the past few months, this column has highlighted a number of opportunities in the energy sector. Ivanhoe Energy, Total Energy Services, and BlackPearl Resources have risen 69, 84 and 52 per cent, respectively, since being featured this past autumn.

The oil sands of Western Canada should continue to light a fire in portfolios. Reflecting the building price momentum is the Claymore Oil Sands ETF. This basket of bitumen producers has shot up 27 per cent in the past three months. Big performers among energy plays in the oil sands include Imperial Oil, along with Ivanhoe and BlackPearl, and Suncor

The Trade

Canadian Oil Sands is signalling a trend trading opportunity. Rising on high trading volume last week, shares in this oil sands producer look attractive as they approach resistance levels that beat back the stock in the past two years.





The Upside

Canadian Oil Sands is among the many energy trusts that have converted to corporations. Although that conversion distorts comparisons, a further 15 per cent short-term move to the $38 level should be an achievable, conservative objective. When the price of crude headed north of $140 in 2008, Canadian Oil Sands units peaked above $50.

The Downside

Dictators of oil-rich countries may retire to quiet retreats. Americans could say enough with their energy eco-fantasy and sing in harmony: "Drill, drill, drill." China's growth may sputter. But short of such dramatic transformations, trend traders entering now should have plenty of time to exit on a drop below $30 if the current fire in the sector goes out.

Skot Kortje has been analyzing stock market trends for 15 years using trend analysis. His Stock Trends indicators have been published by The Globe and Mail since 1995. For more go to Stocktrends.ca





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