Ophir Energy (LSE: OPHR) has seen its share price in strong decline since it peaked at 564p (post-consolidation adjusted figure) in 2012. The stock appeared to find a base in 2016 around 64.5p before climbing to 103p by year end, but has since collapsed to 45p today. Numerous factors have contributed to the price drop, including Institutional selling, and Nick Cooper stepping down as CEO in May. The company has a large asset base but is trying to restructure to increase its producing asset to ramp up cashflow. The Santos acquisition will see Ophir gain stakes in producing fields in Indonesia and Vietnam, costing $205m. The company estimates the assets will add 13,500 boepd to their current output of 11,500 boepd and generate an additional $90m of cashflow annually.
A look at the daily price chart reveals the stock has touched a tried and tested diagonal support level (dotted line) at around 44.3p currently. The Relative Strength Index (RSI) is evidently oversold, and today’s price action has seen it turn up – we will have to wait and see if that continues but it’s a first hint of a reversal.
Aside from the usual moving averages, strong resistance is likely to be met from the top of the current downward channel, and horizontal resistance around 64.5, which acted as support in 2016 – that’s a target zone offering 25-40% upside from today’s price.
Should the dotted line of support fail, next support is likely to be found quite a bit lower at 35p, so it’s worth considering a tight stop loss should you choose to trade Ophir – bear in mind, the support level will gradually decline.
Should Ophir begin to turn the ship ‘Sentiment’ around, a break out above 54.5p could see a return to those late-2017 highs around £1.