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Views from the Trading Floor Friday 27th January
Saints & Sinners
Oil & Gas
Lochard Energy (LON:LHD) were in vogue again today, jumping 14% to 9.25p by the end of lunch, on decent volume. Investors seem confident that the company is in a much better standing after the recent raise of £3.38 million at 7p. The placing, that was oversubscribed will be used to cover costs for the Athena oil development east of the Shetland Islands. Resistance sits at 9.5p, and any break of that could see the stock retest the resistance at 11p. We are also very interested in how the recent bid for Ithaca Energy could affect Lochard, that has a 10% ownership of the Athena filed via its 100% ownership of Zeus Petroluem.
Speculation surrounding Argos Resources (LON:ARG) continued to keep the stock buoyant once again today, pushing the stock another 15% higher to 22.75p before lunch. The stock has been trading around 2 to 4 million shares a day, and has moved in a straight line from 12p to 24p without pausing for breath, so it was no surprise to see a little profit taking over the last 2 sessions. However, the previous resistance at 18p acted as a decent support level and investors took the pull back as an opportunity to take another bite. If the volumes continue to increase here, possibly a retest of the resistance at 24p could be on the cards?
The market has been expecting an update from Aminex (LON:AEX) and SOLO Oil (LON:SOLO) on drilling in Tanzania. The company finally gave the update today, highlighting “the Ntorya-1 exploration well in the Ruvuma Basin onshore in Tanzania, which it operates and in which it has a 56.25% interest, was spudded on the Dec. 21 and has been drilled to 1,535 meters where an intermediate casing string has been set. The well is now drilling ahead towards the target interval of approximately 1,800 to 1,900 meters depth. Ntorya-1 is expected to reach total depth around the end of January. Aminex estimates that the Ntorya Prospect has a probability of success of around 20%, with mean recoverable resource potential of 100 million barrels of oil equivalent.” Both stocks sold off a touch before lunch, with Aminex trading 4% easier to 5p, and SOLO Oil trading 5% easier to 0.73p. Possibly sho rt term traders were disappointed they only got an update that said casing string had been set, and not and update on how much is potentially down there. Longer term holders look to be glued to seats here, as the statement clearly says they will be at target depth around the end of January. So another update could be due early February.
Matra Petroluem (LON:MTA) continued its rich vein of form, pushing another 12% better to 0.85p just after lunch. Volumes are not what they use to be here, but most of the investors look to be in for the long haul, fully believing in the story. With the thin volumes it does deter the day traders from the stock and allow the steady climb to continue. We as a house are very bullish on the Matra story, and currently have a 3.9p price target.
The near 150% rally in Leni Gas (LON:LGO) took a small pause for breath today, as the stock dropped 4% to 1.3p. The run has been backed up by company announcing two great bits of news. The first was a partnership agreement with Range Resources in Trinidad, and the second was a drilling update from the Gulf of Mexico.
The Leed Petroleum (LON:LDP) rollercoaster decided to swing into action again today. The stock jumped 15% just before lunch to 0.6p, on volume of 250 million shares. The stock took a knock after Viridas (LON:VIR) announced it had sold its holding in the company, but bulletin boards continue to speculate that something else could be brewing. After the recent move, one would have thought that if Leed were up to anything behind the scenes, after the recent rally, they would have been forced to announce it to the market. However this one plays out, it sure is interesting to watch.
Xtract Energy (LON:XTR) has started to catch my eye once again, and has consolidated very nicely at the 2p level, creating what looks like a strong support line. The company last gave an update on the 11th of January, and one of the snippets from the RNS said “As previously announced by Xtract, the Maersk Resolve is currently drilling on contract to Maersk Oil and Gas in Denmark. The Maersk Resolve has experienced similar weather conditions as the Byron Welliver over the last few weeks which has impacted their well activities. Noreco has advised that the revised release date by Maersk Oil and Gas of the Maersk Resolve drilling rig is 26(th) January 2012. The rig move will require a suitable weather window to undertake the short tow to the Luna location and subsequent positioning for drilling operations. The move is therefore dependent on weather conditions prevailing at the time of the rig r elease by Maersk. Xtract will provide a further update once it has been advised by Noreco that the well has spudded. The Luna drilling program is expected to take approximately one month in duration.” So if this time line is correct, the rig was released yesterday, and could currently be on tow to the Luna location. Holders might be in store for an update from the company confirming the arrival of the rig on site. We will be keeping the peepers fixed on this one.
Empyrean Energy (LON:EME) jumped another 6.5% to 7p just after lunch. The stock has been on a great run since the turn of the year, and if it can close above the resistance at 6.5p, then that could, in turn become support and a test of major resistance at 7.5p could be the next point of interest.
After the recent rally from 6p to 11p, sellers finally showed up to the Petrel Resources (LON:PET) party. Holders are looking for an update from the company, and have jumped on board recently in the anticipation of getting one. This update has not materialised and possibly a few short term punters are happy to just take a turn. The shares were a penny easier (-10%) to 9.5p.
Mining
Strategic Natural Resources (LON:SNRP) jumped another 9% to 17.5p today. The shares have been in bull mode since the start of the year, and have not looked back since. Shares have moved from 11.5p to the current levels, on anticipation of an update from the company. Major resistance looks to be around 18p, if they can break this level and close above, 20p would be the next major level of resistance to look for.
Uranium Resources (LON:URA) jumped another 11% to 2.5p on decent volume, as holders hope for another update from the company. Shares have been steadily climbing from 2p to the current levels as volumes have been slowly gathering pace. This RNS from the 12th of December had this little point of interest that could be the catalyst for the move higher “1 Results for DH 054 are interpretations of downhole gamma-probe readings. These readings, while adjusted for a number of factors, may still be subject to inaccuracies caused by disequilibrium and radon daughters. In order to establish a most reliable system of interpreting gamma-probe readings, Uranium Resources continues to subject its core to full geochemical assays. Once received, the Company will publish “ Could the holders here be in store for the assay results?
Sirius Minerals (LON:SXX) continued to be very active today, after the company announced late on in the session yesterday that it had placed 305 million new shares at 18p to raise a whopping £55 million. Now that is very impressive in the current financial climate to raise such a number, they must have had something very interesting to say to the people it had raised the money from. All we can see from the announcement is “The net proceeds from the Placing will be used to accelerate the development of the York Potash Project and provide funding to see the project through to the Definitive Feasibility Study ("DFS"). & Russell Scrimshaw, Chairman of Sirius, has indicated his intention to subscribe for approximately GBP3.4m of Placing Shares.” Its always very reassuring to see the top brass putting money into the firm they are part of, so we will have this one firmly on the watc h list.
Volumes have been through the roof over the last three trading sessions on Frontera Resources (LON:FRR). The stock has not really moved a lot in terms of price, but with volumes like this, one can only assume a seller is working its way through the system. Shares were 10% better in trading to 1.35p on a whopping 73 million shares traded by the end of lunch. We will be watching for the holding announcements to see if anyone reports they were behind the volume.
Serabi (LON:SRB) has been in bull mode for the last few sessions, since the company announced it had raised £2.73 million via a placing at 10p. Shares jumped another 12% to 12.5p before the end of lunch, on 4 times the average daily volume. If the stock can break resistance at 13p, then 15p would be the next line of major resistance to watch for.
A stock I have been keeping a close eye on over the last week or so is Alba Minerals (LON:ALBA). The stock caught my eye as volumes started to steadily increase, and today the shares added another 10% by lunch, to 0.9p. The stock has almost doubled in price over the last few weeks of trading, and if the sentiment continues like it has done, 1.1p could be the next resistance level to watch for.
Anglo Asian (LON:AAZ) is another stock that has been on a fantastic run since the start of the year, pushing another 9% higher to 46p during trading today. The stock has been jumping on 5 to 10 times the average daily volume since mid-January, and holders got a what looked like a very positive update on 4th quarter Gold output, increasing to 15,292 ounces from 13,166 ounces in the 3rd quarter. The stock looks to be approaching major resistance at 47p to 48p, so it will be interesting how the stock reacts from here.
From the trading floor
The FTSE 100 could not break its major resistance at 5820, and as a result we have seen a selloff today. As I type the FTSE is 54 points easier at 5741 (-0.93%) on volume of less than 450 million shares. The AIM All-Share index was trading 0.42% easier on volume of 1.3 billion.
US GDP was the main focal point of the day across the pond, with expectations of an increase of 3%. The number was as most of the market with a realistic view expected, a little easier than predictions, hitting the wires at +2.8%.
I spoke briefly yesterday about the bullish move in the base metals prices, and that bullish trend continued again today, push most higher again in trading. Below is a comparison index of Lead, Zinc, Nickel and copper, and how they have all performed since the beginning of 2011. All four are still in negative territory in terms of percentage appreciation or depreciation over the last 12 months, which gives us a clue as to how far these could continue to rally if demand continues. We have a basket of stocks we are looking at, that could be used to play the moves here. Some would be more leveraged than others to the moves in the underlying commodity of course.
Base Metals Comparison Index
Nickel = White line (-16.45% YoY) / Copper = Orange line (-9.01% YoY) / Zinc = Yellow line (-3.24% YoY) / Lead = Green line (-2.87% YoY)
Commodities Corner
Gold – ↑Trading at $1725, up $6 (+0.35%)
Silver – ↑Trading at $33.64, up 17c (+0.44%)
Copper – ↑Trading at $8545, up $69 (+0.81%)
Zinc – ↑ Trading at $2161, up $1 (+0.05%)
WTI Crude – ↑Trading at $99.63, up 3c (+0.03%)
Brent Crude – ↑Trading at $111.29, up 50c (+0.45%)
Natural Gas (HH) – ↓ Trading at $2.55, down 4c (-2.03%)
FX
GBP vs USD = 1.5709
GBP vs EUR = 1.1975
Written by Steven Asfour, Sales Trader at Fox-Davies
