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Don't bank on a rally in Bankers Petroleum

The Patos Marinza oil field in Albania

Bankers Petroleum

Hi Lou:

Bankers Petroleum! What is you assessment? I am thinking of buying it.


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Hi Humayun,

I last ran the charts on Bankers Petroleum Ltd. on Jan. 12, 2011 for William. At the time the shares were trading at $8.67 and I noted that it appeared that there was a pull back in the offing. But not withstanding that, BNK had a good shot at testing its all time high of $10.00. The stock did pull back and then test $10.00 but failed to break through. Since then the stock has retreated below its trading value in January.

Let's consult the charts for some inkling of what may be in store for this Canadian energy company looking to further develop heavy oil reserves in Albania.

The three-year chart tells the tale of a huge advance off the 2009 lows, which generated a 20 bagger for investors who caught all of the ride to the highs in early 2010. Since then the stock had been moving sideways with support at $6.50 and resistance at $8.00 until the breakout towards $10.00 in 2011.

The six-month chart offers a vantage point on the period since the last post in January of 2011. Note the retreat in mid January and the advance to resistance at $9.75. The MACD and RSI signalled a shift in momentum in early March back to $7.75. The stock formed a double bottom along support on the 200-day moving average and moved up to $9.25 by early April.

Once again the MACD and RSI signalled a shift in momentum to the sell side, which took the stock back into a retreat. If you look closely at the trading action in May of 2011 there was selling that came in ahead of the May 13 release of first-quarter results, when the stock was still trading close to $8.00.

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The first-quarter results missed the Street which took the stock down to $7.20. There has been a bit of a move higher from $7.20 on May 17, 2011 to resistance at $7.90. The problem I have on the move up is that's it has been on thinner than average volume since May 17 and that's puts a caution flag on the track.

BNK is currently producing 13,500 barrels of oil per day. Their target for 2011 is to reach 20,000 barrels of oil per day. They have spent $51.9-million of a $200-million capital budget for 2011. I don't think this is the right time to buy BNK. Given the downtrend that is in place and the thinning volume it would be prudent to consider being patient until the next period of seasonal strength for energy stocks that begins in early July.

Happy Capitalism!

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