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Death cross haunts Canadian Natural Resources

Hi Lou,

Was wondering if you see any positive changes for CNQ?


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Hey Peter,

Thanks for the assignment. Canadian Natural Resources Ltd. is one of Canada's largest independent producers of oil, natural gas, and natural gas liquids. They have operations in North America, the North Sea and offshore Africa.

The company has a huge investment in the Alberta oil sands. Their Horizon project has cost $9.7-billion and is expected see another $2-billion invested to get production up to 250,000 barrels per day. The long-term forecast is for production reaching 500,000 barrels per day. What has to be expected in the production of bitumen are technical problems.

Currently the company is looking at between 93,000 and 103,000 barrels per day of production from Horizon in 2012. That is down from earlier guidance of between 105,000 and 115,000 barrels per day due primarily to maintenance issues. If you have followed the oil sands sector for any length of time these disruptions are to be expected.

The primary concerns for CNQ and the rest of the Canadian energy sector are the low prices for natural gas and the pipeline bottlenecks that are preventing crude from reaching refiners.

With those issues on the table a review of the charts will provide more particulars for your consideration.

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The three-year chart clearly indicates that the stock has been in a downtrend since March of 2011 when it was trading at $50.00. The shares are testing support at $30.00 and need to hold these levels if we are to see a reversal to the upside.

The six-month chart denotes the resistance that the stock has encountered along the 50-day moving average. There is also a death cross on the chart, which suggests that a lot of work will need to be done to reverse the downtrend.

The MACD and RSI are both signalling a move higher but I would expect resistance to come into play and arrest a short-term advance. What we really need is a major move higher in commodity prices.

The solution to many of the problems in the Canadian energy sector is the extremely low price of natural gas. Some analysts are suggesting that we could see a recovery in the price of natural gas, which would lift all the boats. I want to see that happen, but will wait until it does.

Make it a profitable day and happy capitalism!

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