The share price of Anglo African Oil & Gas (LSE:AAOG) has slipped a little while shareholders await a further update on the workovers of the TLP-101 and TLP-102 wells. A pullback comes as no surprise having had a good run from the lows of 9p to a resistance level of 15.75p.
The price action has reached the bottom of its trend channel having neatly closed the previous small gap-up in early March. Why this is important eludes me, and ‘gap-closing’ is a bit of a mystery but it often occurs as part of the process of consolidation before onward movements! Looking ahead the first resistance at 15.75p will need to be conquered, but cooling off of the Relative Strength Index (RSI) now offers extra headroom available for such a move. The 200 Day Moving Average (DMA) is now at 15.5p and a close above here would be bullish. Keep your eye on the 50 DMA too which is climbing, narrowing its divergence with the 200 DMA – a crossing above, called a ‘Golden Cross’, is a very bullish signal. Assuming resistance is breakable, the next logical target will be the top of the current trend channel around 17-18p. However with news flow due on workovers and that all important big drill of TLP-103 due to commence in June, the potential upside on offer is considerably more in my opinion.
Investor concern over the possible need for a future fundraise continue to overshadow the stock’s price and, as with all oil companies, there is considerable downside risk from ongoing operations too. Disappointing workover news, failure to extend the company’s licence, or drilling delays all pose a threat to the short-term share price. With a backdrop of $70 oil and a balancing oil market, the potential reward should all the ducks line up only gets bigger, and don’t forget Anglo is still at a sizeable discount to its 20p IPO price.