IFC Markets - Analytics

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Technical Analysis PCI : 2016-03-03

ADR outpaced oil prices by far

Since the start of the year the ADRs of Russian oil company Surgutneftegas edged up by 15% while the Brent crude price is almost permanent. The ADR rise may have been caused by political factors and does not fully reflect the company’s financial statement. Let’s study the performance of the personal composite instrument Brent/SNGS. It has slumped 40% since the mid-2015. Can it correct upwards?

The latest released IFRS financial statements of Surgutneftegas are for the first half of 2015. The company’s revenue fell 30% to $9.37bn compared to the same period of 2014 while the net income fell 38% to $2.35bn. Brent crude fell from $66 to $37 a barrel or by 44% in the second half of 2015. The annual statements are expected at late April – early May. The company’s financial indicators are unlikely to improve given the global oil prices dynamics in the second half of last year. The company’s top management announced the plans to marginally cut the oil output this year by 0.3%. Currently Surgutneftegas is fighting for the permission to extract hydrocarbons in the nature park “Numto” in the Khanty-Mansi autonomous district which Greenpeace and locals strongly oppose.

 

PCI

On the daily chart Brent/SNGS: D1 is in downtrend. Couple of days ago it hit a fresh 7-year low and is now correcting upwards. The Parabolic and MACD indicators have formed the signals to buy. RSI is rising but has not yet reached the level of 50. The positive divergence is seen. The Bollinger bands have contracted a lot which means low volatility. The bullish momentum may develop in case the personal composite instrument surpasses the last fractal high and the Parabolic and Bollinger signals at 1.033. This level may serve the point of entry. The initial risk-limit may be placed below the Parabolic signal, 7-year low and the last fractal low at 0.954. Having opened the pending order we shall move the stop to the next fractal low following the Parabolic and Bollinger signals. Thus, we are changing the probable profit/loss ratio to the breakeven point. The most risk-averse traders may switch to the 4-hour chart after the trade and place there a stop-loss moving it in the direction of the trade. If the price meets the stop-loss level at 0.954 without reaching the order at 1.033, we recommend cancelling the position: the market sustains internal changes which were not taken into account.

 

Position Buy
Buy stop above 1.033
Stop loss below 0.954


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