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Roughneck Brian Waldner is covered in mud and oil while wrestling pipe on a True Company oil drilling rig outside Watford, North Dakota, Oct. 20, 2012. (JIM URQUHART/REUTERS)
Roughneck Brian Waldner is covered in mud and oil while wrestling pipe on a True Company oil drilling rig outside Watford, North Dakota, Oct. 20, 2012. (JIM URQUHART/REUTERS)

Schizas’ Mailbag

Trilogy Energy Corp. has more gas in the tank Add to ...

Hi Lou,

I am becoming one of you faithful followers.

I was thinking of getting into Trilogy Energy and wondered what your thoughts are on it.

Also, anything to watch for.

Thanks,

Susan

Hey Susan,

Thanks for your kind words and support! Glad to hear that you are making good use of the analysis.

Trilogy Energy Corp. has an inventory of infill drilling opportunities on its land base in Alberta which allows for production growth with a lower risk profile. The company has a high working interest in its operations and is focused on properties with lower decline rates. Currently 40 per cent of production is oil and natural gas liquids which is expected to increase to 42 per cent at the end of 2012. The skew to natural gas might help explain some of the selling that hit the shares in 2012. The company missed the street in fourth quarter 2011 and first– and second-quarter 2012 as it started to shift operations towards increasing its production of oil.

More Related to this Story

A review of the charts will provide great insight as how best to proceed with this investment.

The three-year chart tells the tale of a stock that hit an all time high of $39.43 on December 8, 2011. But that was as good as it was going to get. The stock quickly breached its uptrend line and proceeded to give up a significant amount of shareholder value as it retreated to a 52-week low at $20.33 on June 25, 2012. That’s one bad haircut!

Worth noting is the breach of support along the 200-day moving average in March of 2012 and the death cross that surfaced later in the month. There has been a lift off the lows and what appears to be a cup and handle formation is developing. A cup and handle is a continuation pattern that suggests that the current advance has more gas in the tank.

The six-month chart depicts the buy signals generated by the RSI and the MACD in early September that culminated in a move to just over $28.00. The stock has broken above the 50– and 200-day moving averages and it appears that a crossover is eminent. The RSI is signalling a move higher while the MACD has yet to make the turn. Take notice of the double bottom that formed in June and July signalling a trend reversal. With natural gas drilling in slowdown mode across the continent and improving price for dry gas it looks like a trade is setting up for TET.

Make it a profitable day and happy capitalism!

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

 
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