FairWest Energy Corp. will benefit from a bounce in Oil
Energy Market Outlook (12/4/05):
Regardless of individual stock selection, the overall outlook for the energy sector contributes to 80% of the anticipated move.
The Oil price looks to have successfully bounced off it’s 50-week moving average and should resume its uptrend.
With the overall stockmarket showing signs of strength (a normal correction is now expected then renewed strength in first quarter ‘06) the outlook for equities is quite positive which will help energy stocks.
Fundamentals:
FairWest Energy Corporation is a Calgary, Alberta based company engaged in the acquisition, development and production of oil and natural gas reserves in the provinces of Alberta and Saskatchewan.
FairWest is a company resulting from the amalgamation of Fairstar Explorations Inc. and Western Energy Corporation effective August 19, 2005.
What appeals to me most about FairWest is the level of insider buying over the last 6 months. Approximately 250,000 shares purchased at an average price of 60c in open market purchases.
View Insider buying
To view data on the above link select Issuer name = FairWest Energy and begin date = 6/4/05, end date 12/4/05. Transaction/s #10 is the open market insider purchases.
Technicals:
The chart below shows the price of Fairwest Energy against the price of Oil (thick black line).
One can see that Fairwest moves in synch with the price of oil (especially the spike in September ‘05).
Providing the relationship continues, and there is no reason to suspect it won’t, Fairwest will benefit from any strength in the price of Oil.
The MACD crossover (red circle) is highlighting some possible early bottoming action.
It is worthwhile to start accumulating FEC at these levels.
I will place a stop loss at 38c (15% below current market price) which is below the previous two bottoms of 40c.
I will take profits by selling half of my holdings when the price reaches its 200 day moving average (currently at 71c).
FairWest superimposed against Oil price (in black)
Money Management:
I will commit 2% of my portfolio to this position.