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Don’t fight the tape with this energy producer

Oil pumps work at sunset, Sept. 11, 2013, in the desert oil fields of Sakhir, Bahrain. A wider glance at the world of oil reveals a lot more new barrels coming to market. Other regions are busy pumping up capacity too – for instance, the Canadian oil sands and Iraq are notable for their scale.

Hasan Jamali/AP

Hi Lou,

Please take a look at PRY. It's a smaller oil & gas stock that has moved up this fall on very strong insider buying. Unlike a lot of similar stocks this one shows steady earnings and a strong Return on Equity but does not appear to have much of an analyst following.

I would appreciate your opinion.

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Hey Ron,

Thanks for the assignment.

This will be the second time that I examine the case for Pinecrest Energy Inc. on your behalf. The first was on Oct. 2, 2013, when the shares were trading for $0.51. The research conducted at that time indicated that the stock had been struggling with a downtrend that started in February of 2012 when the stock was trading close to $3.50. The charts indicated that a death cross had formed in May of 2012 when the shares were trading for $2.25, alerting the astute investor that it would be wise to get out while the getting was good.

As the stock ground its way down to rock bottom in September of 2013 the MACD and the RSI both signalled a buy, taking the shares to a high near $0.60 by late in the month. However, the shares began to pull back and were testing support along the 50-day moving average. It was advised that traders were taking profits and that PRY needed to hold support along the 50-day moving average before making a buy.

You ask why there isn't much of a following for the stock among analysts to which I recommend that you examine the company website where they list research coverage from eleven firms. Another examination of the charts will inform my opinion.

The three-year chart depicts a stock that is still in the grips of a downtrend. What is also evident is that the MACD and RSI signalled the retreat from resistance near $0.60 at the end of September and have yet to indicate that the selling is about to stop. Finally the shares have breached support along the 50-day moving average which adds another level of concern for those watching their trading profits slip away.

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The six-month chart provides a close-up of the trading action since September. In the last two months the stock has settled into a down channel with a series of lower highs and lower lows as it retreated from $0.60 to $0.48. The momentum indicators are not suggesting a trend reversal.

Obviously you have an interest in this stock and are watching it closely. I would advise that you stop fighting the tape. You have mentioned a number of factors that you believe are positive for the stock and yet it's not showing up in the stock price. Keep in mind that PRY is a higher-risk investment and that wanting it to go up won't necessarily make it happen.

Make it a profitable day and happy capitalism!

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About the Author
Lou Schizas

Lou Schizas is an equities analyst, investor, entrepreneur, professor and television and radio personality - and a true believer in the happiness-inspiring powers of capitalism. More


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