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David Lundquist/The Canadian Press

Hi Lou,

Can you please give me your analysis on RMP Energy. I am wondering if it is time to take some profits or does the stock have further to go?



Hey Opal,

Thanks for the assignment.

RMP Energy Inc. is a junior energy producer operating in Alberta. Average output from operations is approximately 6,000- to 6,500-barrels of oil equivalent per day with 60 per cent comprised of light oil and natural gas liquids. The company has identified 120 light oil drilling locations on their acreage at Waskahigan and plans to spend $28-million on facilities to expand production at Ante Creek. The stock had a great run but started to pull back after hitting a 52-week high of $4.74 on May 15, 2013.

An examination of the charts will help identify if RMP is a case of holding or selling.

The three-year chart outlines the move off the 52-week low of $1.35 on June 26, 2012. The advance was of sufficient strength that it allowed the shares to breach resistance at $1.75, $2.00, $2.25, and $2.50. Worth noting is the golden cross that formed in October of 2012 indicating that the advance had more to give. In addition the move higher has been supported by the uptrend line and the 50-day moving average. At this moment the shares are testing support, which requires enhanced surveillance.

The six-month chart depicts the test of support along the 50-day moving average after the retreat that started in May. The RSI and the MACD both generated sell signals as the shares hit the 52-week high. Currently, the momentum indicators are not providing evidence that the downtrend is about to reverse itself. The pullback from the highs is more a case of macroeconomic pressure than actions taken by the company. It's hard for an energy producer to move higher when global economic growth forecasts are being cut, driving investors to run for the exits.

At this point you should capture some profits until the selling pressure abates.

Make it a profitable day and happy capitalism!

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