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A worker on an Athabasca Oil Corp. oil rig.

Handout

Hi Lou,

I bought Athabasca Oil at $6.00. My plan was to sell it around $9.00-$9.50. It seems to have a hard time staying above $8.50.

Could you give me your thoughts on where you see this stock going?

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Much appreciated,

Peter

Hey Peter,

Thanks for the assignment.

This will be the third time that I inspect the details surrounding Athabasca Oil Corporation. The last time was on July 5, 2013, when the shares were trading for $6.72. Eric had asked for my opinion and the analysis pointed to a situation that would appeal to investors with a healthy appetite for risk. The stock had been dealing with resistance along the downtrend line and was operating under a death cross that formed in December of 2012.

The shares had hit a 52-week low of $5.59 in May of 2013 when the MACD and the RSI generated a buy signal. ATH ran until it hit resistance near $8.00 where it pulled back to $6.72 when Eric asked for my thoughts. It was determined that there was no screaming buy signals present and that it didn't appear that a new uptrend had been established. However, by late July the stock did advance to $8.50, rewarding investors with tolerance for risk. But they had to act quickly as the stock hit resistance along the 200-day moving average and pulled back to the $6.00 range by October.

Another examination of the charts will clarify the influences surrounding this investment.

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The three-year chart indicates that ATH caught a lift off of $6.00 in December of 2013 and marched to $8.75 by late February of 2014. Once again the shares pulled back and are now retesting support at $7.70. Worth mentioning are the golden cross formed in early February and the break above the established downtrend line at the end of last year.

The six-month chart exemplifies the need to closely watch the signals generated by the MACD and the RSI. The buy signals in late December provided an opportunity for a profitable trade while the sell signals in March encouraged capturing profits when available. At this point the momentum indicators represent continued selling pressure.

Although there are some positive patterns I maintain that ATH is a stock for those with an appetite for risk. The stock has provided trading opportunities but has yet to establish a solid uptrend. Trade this one for profit when they are available.

Make it a profitable day and happy capitalism!

Have your own question for Lou? Send it in to lou@happycapitalism.com.

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