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Energy company's charts are flashing 'sell'
schizas’ mailbag
Lou Schizas
Special to The Globe and Mail

This article was published more than 9 years ago. Some information may no longer be current.

Hi Lou,

I was wondering what your thoughts on Savanna Energy Services are?

Thanks,

Matt

Hey Matt,

Thanks for the assignment.

This will be the second time that I examine the situation at Savanna Energy Services Corp. (SVY). The last occasion was on Nov. 3, 2012, on a request from John. The shares were trading for $6.78 and he wanted my input. The research indicated that the shares had been trading sideways in a range-bound pattern with resistance at $8.00 and support at $6.80. The stock had oscillated through the range six times over the course of the previous twelve months and it was advised to trade SVY for profit and avoid a buy and hold strategy.

I also suggested that it would be best to be patient and wait for a buy signal from the momentum indicators before committing capital. In retrospect, that was the right call as the stock breached support by mid-November of 2012.

A follow up investigation will highlight current trends and patterns on the charts.

Click on image to enlarge

The three-year chart indicates that the stock traded in a gentle downtrend through the first seven months of 2013 until it broke above resistance and ran to a 52-week high of $9.32 by April of 2014. The advance was signalled with the formation of a golden cross and buy signals generated by the MACD and the RSI in July of 2013.

Since April of this year, SVY has been giving back a substantial portion of the gains from the leg up and has broken below the 50- and 200-day moving averages. The momentum indicators generated sell signals as the stock hit the 52-week high.

Click on image to enlarge

The six-month chart depicts the downtrend that is now in play and the breach of support along the moving averages. Sell signals from the RSI and the MACD are also clearly visible. At the present time the momentum indicators are not signalling a near-term trend reversal. I would advise that you wait for more visibility as to direction and as per the last analysis – trade this one for profit!

Make it a profitable day and happy capitalism!

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