Chariot Oil Shares Going Down in a Blaze of Glory

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All the signs point to Chariot Oil stock (LSE:CHAR) plummeting. Even any supposed positive news might not help the stock to the upside. There are times when fundamental figures would be positive, yet certain stocks would still continue to weaken further. This presumed abnegation of any fundamentals could push the price up (futilely). Bad fundamentals would merely serve to push this stock farther south.

Technical Forecast
Technically, short-term trendlines and the Relative Strength Index (RSI) period 14 are used for this analysis. Looking at the chart, we can see that the current price phase requires some skill and experience to handle. On May 14, 2012, there was a massive gap in this market, as the price closed at 149.25 on May 11 and opened at 94.75 on May 14. This stands for a loss of over 5400 points in a relatively short period of time! Even on the day the gap occurred, the price was characterized by a bearish engulfing pattern candlestick as it trended downwards after that. From June 15 to August 7, 2012, there was a moderate bullish rise in the markets – as if it was preparing itself for sellers to enter at better prices. The RSI was above the level 50 within this period. On August 8, 2012, a new bearish phase started and has remained valid till now. What will happen next?

The trendlines drawn around the recent price development show that the market is expected to fall. This is further confirmed by the RSI 14 as it has already gone below the level at 50. Very recently the price attempted to break the upper line of the trendlines to the upside as buyers were caught in irrational exuberance. These proved to be false breakouts since the 3 last candles that attempted to break the upper line failed to close above it. This is a SELL signal. The stock was trading at 106 when this article was being prepared. The nearest supply zones are around the levels at 107.00 and 107.50. These are supposed to act as a barrier to buyers’ interest: the price would test and attempt to break the demand zones at 105.00 and 104.50 as sellers gain further strength. Another further dip in the RSI could indicate further weakness in this market.

Conclusion: This analysis lends itself to the reality on chart for Chariot Oil. Breakouts above the RSI level 50 indicate bullish pressure and breakouts below the RSI level 50 indicate bearish pressure.

This article is ended with a quote from one of the best trading coaches in the world:

“If you attempt to do complex things with the market that require you to use more capacity than you have, then you’ll probably fail.” – Dr. Van K. Tharp

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Comments

  1. Tim says:

    Azeez – I appreciate your comments and your analytical review of Chariot. However this is purely based on technicalities and past performance.

    Surely this stock is different and the price is influenced by a number of other factors –

    Primarily, will oil be found – this has little to do with past performance, due dividends, previous profits, turnover targets etc. If oil is found, happy days – if they don’t find oil it has been one very expensive exercise. In either case the share price will be moved significantly.

    The current volatility and massive trading is due more than likely to market makers manipulating the price, or, though most unlikely, there has been news leaked from the drill site – I doubt this

    As investors in this stock – we are basically all gamblers – gambling on oil/gas being discovered in large quantities – the fundamentals don’t mean too much

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