Below is a highly requested chart analysis from Wednesday’s action showing a Bullish Piercing Pattern.
Gran Tierra Energy (GTE)
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A/D line: Strong accumulation that continues to uptrend
ADX line: A very strong bullish trend since August 27th
MACD: Positive momentum that started slowing down during the pullback
CMF (21): Bullish and anything over .50 is very bullish.
OBV: Confirmed all moves in the PPS, indicating more upside potential
RSI: Healthy pullback put it back in neutral territory but still close to overbought area
Technical Analysis: GTE recently established a new 52-week high on October 1st. This concerns many market players who think that being near a 52-week high means the upside is capped. While some times that is true, it is not a good idea to be fearful of a stock being bullish as you can miss significant gains. GTE has plenty of room to run but, crude oil prices will be one factor in how high it can go. The higher crude oil goes, the easier it will be for GTE to continue its run.
Personally, I tend to search for 52-week high charts that I like rather than most market players who are eager to sell and look for stocks that are beaten up to buy. Especially in a tough market as we’ve seen this year, I prefer to be in a stock that is already showing strength rather than a stock that is already weak. GTE is exactly what I am looking for. The underlying accumulation is very strong and makes me feel comfortable holding this stock since many others are continuing to hold it. When searching for stocks breaking or near 52-week highs, I prefer to have confirmation on the A/D line that the bulls are still intact. In this case, the bulls are still holding.
What I really liked about GTE today and the reason I added to my position late in the day was due to the leveling off of the pullback (showing pulls are re-entering) and the fact that today formed a Bullish Piercing Line pattern. This pattern is a strong indicator of more upside potential. This pattern is established during a downtrend when the stock opens below the closing price of the previous day and closed above the midpoint of the previous day’s red candle. Earlier in the day, GTE was in the process of forming a bullish engulfing pattern but couldn’t quite close above yesterday’s price.
Many technicians tend to wait for confirmation of bullish behavior and buy after the next day shows more buying. In this case, due to the high accumulation levels and the near-term support levels, I added more GTE today and will look to add even more tomorrow morning on any bullish moves above today’s closing price.
I expect resistance to sit around the 52-week high of 7.87 and will look to further add to my position on any high volume moves that enthusiastically break resistance. My stop losses will be at the lows of the September 30th green candle but, any poor action might see me sell before it gets to that level as I am already above my cost basis. Breaking below that green candle is likely to trigger more sells therefore, I’ll get out and let the dust settle before I consider putting money back to work here.
For requested chart analysis, I simply use technical analysis. I do not combine my analysis with any fundamental view or specific due diligence on the company (unless otherwise stated) when building my analysis. Make sure you include all relevant information when making a decision.
Good luck out there,
Mike
At the time of publication, Kudrna was long GTE but positions may change at any time.
