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(John Foxx/Getty Images)
(John Foxx/Getty Images)

Schizas’ Mailbag

Is Athabasca Oil a buy? Add to ...

Hi Lou: I would like to hear your opinion on Athabasca Oil. Thanks, Eric

Hey Eric,

Thanks for the assignment. This will be the second time that I examine the case for Athabasca Oil Corp. The last undertaking was on March 15, 2013, when the shares were trading for $9.35. Matt wanted to know if it was a good entry point. The research conducted on his behalf indicated that patience would be the wise course. The stock had been in a downtrend since October, 2012, and the MACD and the RSI were not indicating that investors could anticipate a trend reversal. Also noted was the failure to hold support at $10 and the struggle to find support where it had not existed before.

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Retrospectively, it was the right call. ATH continued to sell off to a 52-week low of $5.59 on May 13, 2013, where it caught a bounce to nearly $8 before pulling back. Another investigation of the charts will inform my thoughts on how best to manage the opportunities and risks associated with this investment.

The three-year chart indicates the stock is still dealing with some challenges including continued resistance along the downtrend line. There is also the death cross that surfaced in December, 2012, which informed the knowledgeable investor it was time to seriously examine the case for continuing to hold ATH. The MACD and the RSI both generated buy signals in May, 2013, as the shares finally saw buying overcome the selling pressure that had destroyed so much shareholder value.

The six-month chart isn’t producing any screaming buy signals. The MACD and the RSI are both neutral at best. Make note of the resistance near $8 and along the 50-day moving average. I would suggest that ATH is an investment for those with a healthy appetite for risk given there is no clear indication that a new uptrend has been established. If you like the story, continue to monitor how the shares move as they approach their second-quarter report slated for later in this month.

Make it a profitable day and happy capitalism!

 
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