Niko Resources has been hammered as of late and is now trading at half the 2011 highs. With oil prices averaging $100 and plenty of oil and liquid natural gas blocks on tap for drilling in Indonesia and Trinidad, where do you see this stock going on a technical basis? Do you see continued downward pressures on the shares? I would greatly appreciate your analysis,
Daniel in Vancouver, BC
I last ran the Niko Resources Ltd. charts on April 8, 2011 for Jag. At the time the shares were trading for $93.38 and I advised caution. The stock had failed to break above resistance at $94.00 on thinning volume and the MACD was turning lower. It was suggested that the best course of action was for Jag to keep his powder dry. Retrospectively, that was the right call.
It was noted that NKO would be spending a good part of 2011 on geophysical analysis of its seismic data, which doesn’t usually get investors hitting the buy button. A review of the charts will provide a new analysis of the prospects for NKO.
The three-year chart illustrates the brutal selling that has come into the stock since the April 8 post. On a positive note, the downtrend has been broken and a double bottom seems to be forming. Again I advise caution. If you are looking for an advance, NKO has to catch a bounce off of $40.00.
The MACD and RSI on six-month charts signalled the move up from $40.00 in early October 2011 to the high in early November at $57.50. A 43.75 per cent return in thirty days is sweet to say the least.
Shortly after the shares hit $57.50, the MACD generated a sell signal that is still in play. At the moment, I would not be a buyer until the MACD and RSI indicated a shift away from the selling pressure that has been hanging over the stock for five weeks.
If it catches a bounce off of $40.00 it could be an indication that NKO is ready to reverse the downtrend. Until a new uptrend is established, be prepared to trade this one for income.
Make it a profitable day and happy capitalism!
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