After
roughly 5 months of perpetual bear market, the shares at GKP (Gulf Keystone
Petroleum Limited) have long started rising. This company, an independent oil
and gas exploration and production company which operates in Iraq , is registered in Bermuda
and was listed on AIM in 2004. It has a big number of investors, and as a
result of a number of factors, the stock is volatile.
Now let us
see what is happening technically.
Technical Forecast: A Rally Is Here
The GKP
stock went up nicely at the beginning of the year 2012, went above 400 and topped
in February and began to nosedive around the middle of that month. The bearish
trend continued until June 29, 2012. On the price chart, you would see that the
EMA 21 (Exponential Moving Average) was sloping downwards within this period.
The best strategies that could have been used during that period are the ones
that allow market speculators to go short in the falling market. Yes, a
short-seller would have made a fortune.
While the
price was falling, the Stochastic stayed very long in the oversold territory
(which was the level below 20), especially in the month of June when the price
went to a low of 139.25. In most cases, when the Stochastic stays too long in
an overbought or oversold territory before reversing, it signifies that the next
price reversal in the price would be significant. This is exactly what has
happened to this stock. You can see that after some protracted movement around
the Stochastic level 20 (plus often along the level 0), the price eventually
rallied and began to go up. The rally started on June 29, 2012. It first looked
as if this was a false breakout, since there might be some countertrend
movement against the primary trend - only for the price to blend again with the
latter. Please look at the chart.
On July 3,
the price crossed the EMA 21 to the upside, a development that showed that this
northward journey could continue. The price has been trading above the EMA
since then. At the time of writing this forecast, the stock was trading at
214.25 level. The next resistance level is 215.50 and if this is broken to the
upside, the price could go on to the level at 215.00. Note that the Stochastic
has already gone to the oversold territory (above the level 80), trying to head
down. No wonder the price is trying to consolidate lower, because the bears are
currently in a cut-throat struggle against the bulls. Today has been bearish,
yet any potential rally in the days to come could signify the supremacy of
buyers. There are demand zones at price levels of 210.00, 200.50 and 200.00.
These levels could resist any bearish threat (except there are bad fundamentals
from the blue).
Conclusion: As far as
the markets are concerned, price is king. Successful market wizards thus prefer
to go along the flow of the market; not against it. Active traders could decide
to go short, go long or stay out of the markets, depending on what the markets
are doing now. The GSK stock is currently
a financial Cave of Adullam, as buyers are now hopeful; wishing they could take
back their pride as it was in the beginning of this year.
As I am
fond of doing, I would like to end this article with the quote below:
“Our doubts are traitors, and
make us lose the good we oft might win, by fearing to attempt.” - William Shakespeare
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