I always enjoy your column and appreciate your advice.
Could you give me your opinion on Palliser Oil & Gas.
Thanks for your kind words and the assignment.
Palliser Oil & Gas Corporation is a junior oil company with a focus on heavy oil in the Lloydminster area of Alberta and Saskatchewan. The company currently produces 2,500 barrels of oil equivalent per day (BOED) and expects to exit 2013 with 2,800-2,900 BOED. They drill low-cost shallow wells and have a large land base with a prospect inventory that will keep them busy for the next five years.
What you should not ignore are some of the risk factors associated with this company. The first is their $35.35-million market capitalization. The smaller the cap the greater the risk. Another issue you need to manage is liquidity. Over the last three months the average daily volume for PXL is 87,403 shares. Over the last thirty trading days volume has been better than average only 33 per cent of the time.
An examination of the charts will add to our shared understanding of the opportunities and risks associated with this investment.
The three-year chart outlines the trading range for the stock since June of 2012 with support at $0.40 and resistance at $0.70. Keeping in mind that the range-bound pattern is certainly an improvement over the steep decline that dominated the chart from April of 2011. What is also evident from the chart is that PXL is a choppy trader with generally low volume.
The six-month chart is not producing a strong set of signals that now would be a great time to be a buyer. The RSI is turning lower and the MACD also appears to be bending down. The shares are meeting resistance at $0.625 which could set up a retest of support along the 50-day moving average.
You would need a fairly robust appetite for risk to be chasing PXL. Its a micro-cap, with relatively thin volume, and no clear sense of direction. At this time the best course of action would be to look towards trading the shares within their established range until there is a clear indication of a breakout.
Make it a profitable day and happy capitalism!
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