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Workers tap deep into North Dakota's Bakken formation, on a Precision Drilling rig. (Nathan VanderKlippe/Nathan VanderKlippe/For The Globe and Mail)
Workers tap deep into North Dakota's Bakken formation, on a Precision Drilling rig. (Nathan VanderKlippe/Nathan VanderKlippe/For The Globe and Mail)

Schizas' Mailbag

Precision Drilling Corp. in a downtrend Add to ...

Hi Lou

Thanks for your interesting columns.

Precision Drilling has hit some lofty heights but seems in a downward spiral. Any relief in sight?

Thanks for any comment,

Doug



Hey Doug,

This will be the second time that I analyze the share of Precision Drilling Corp. . The first occasion was on Dec. 6, 2010 when the stock was trading at $9.12.

More related to this story

Gary, who gave me the assignment, was very excited about the prospects for PD and declared that he saw $15.00 by the spring of 2011. The work I conducted on his behalf confirmed that the stock was in an uptrend and that his call had a very good probability of coming in. Which it did. But as with all things in life, nothing lasts forever. The advance stalled in late July of 2011 when we saw the trend reverse dragging the shares down to their current trading range.

Another run at the charts will provide added context to your due diligence.

The three-year chart provides the chalk outline that tells the tale of the rise and fall of the shares. The uptrend that started in October of 2010 and was confirmed by the golden cross that formed in December of the same year was breached as we came into June of 2011. The spike high at $17.00 in July was all she wrote for the good times.

The last ten months have been a tale of woe as the stock gave up the better part of $8.00 and struggled with resistance along the 200-day moving average. In addition, the death cross that formed in September of 2011 needs to be acknowledged.

The six-month chart illustrates the resistance along the 200-day moving average and the support that seems to be forming at $8.75. The RSI is indicating that the shares are oversold and the MACD appears to be turning higher.

The stock has provided a number of trading opportunities in this downtrend of which the bounce off $9.50 in January of 2012 to $12.50 in March was the most profitable.

The worst case is that PD has to retest support at $8.00 the best case at this moment is a bounce off these levels to resistance along the 50-day moving average at $10.75.

With a downtrend in place and weakness in natural gas its not likely that we will see a reversal just yet but there are opportunities to trade for profit.

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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