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Bowleven between drills: Is it time to consider an entry?

The share price of Bowleven (LSE:BLVN) is still reeling from the disappointing IM-6 well results in August. The result saw the drilling partners choose to skip drilling IM-7, opting to move the rig to IE-4 backup location. The  IE-4 well will target a previously undrilled sand package which is believed to be analogous to the 410 sand package at the IM-5 location.

At today’s price of 29p a share, Bowleven has a Market Cap of £92.5m, backed up significantly by its cash balance, which was $83.3m at 31 December 2017. It’s worth noting that is with no debt or material financial commitments.  As the company dusts itself off and prepares for the next drill, we look to the charts for guidance on what might be a good entry point.

After the drill results, the share price dipped to 25.5p before a recovery bounce took it up to 34p, closing the gap down. The price has since dipped back to just over 26p and does now appear to be consolidating. The Relative Strength Index (RSI) shows the current boxing in of the price and is indicating a decision on direction is imminent.

The stock hit 29p again this morning but has been pegged back to 28.5p as I write, moving under the RSI line of resistance. Should a breakout to the upside fail, we may see a retest of the bottom of the current price channel (bold black lines) that stretches back to 2016 lows. In the event Bowleven sees further price weakness, a strong buy zone can be found around 23-24p. Of course, that’s still a sizeable drop from today’s price so a risk-averse trade might be taken when the 30p area is regained, confirming a likely continuation of the upward trend.  There appears to be very little upside priced into Bowleven’s current share price. With the energy sector so buoyant, picking up unloved Bowleven in between drills might prove to be a shrewd move.

Author: Stuart Langelaan

Disclosure: The author does not hold positions in any of the stocks mentioned above

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