Upside For Santos

This story features SANTOS LIMITED. For more info SHARE ANALYSIS: STO

By Michael Gable 

The recent weakness in the Australian market has seen it find our anticipated support level under 5400 and then exceed it, briefly trading under 5300 for the ASX200. Yesterday’s jump was on the back of a 0.4 per cent interest rate cut in China (hence why the miners outperformed) and new commentary from ECB president Mario Draghi that they are looking to broaden their stimulus measures to combat inflation. Despite this week probably looking more positive than negative, the sharpness of the falls in the last couple of weeks is telling us that we may still see slightly lower levels. A lack of strength in the Aussie dollar is also very telling. So, any bounce in our market will likely encounter renewed selling. We therefore stand a chance to see our market dip into the 5200’s before finding its feet and resuming the uptrend.

Today we spot a trading opportunity in Santos ((STO)).

Along with other energy stocks, STO has suffered a very swift drop in the share price. From here though, the selling appears to be over and for the short term at least, we should expect to see higher levels. The stock became heavily oversold in October as measured by the RSI. It bounced briefly but then it dropped further and became oversold again (circled). What is interesting to note is that while the share price has gone to a new low, the momentum as measured by the RSI has already started trending higher. This divergence is indicated by the diagonal lines on the chart. This set-up often leads to a nice bounce in the share price. We have started to see that happen already in the last couple of days. Therefore any slight dip would be a buying opportunity. For traders, we would want to see STO respect last week’s low. There appears to be some obvious resistance up at $13.20 and $13.90.
 

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Michael Gable is managing Director of  Fairmont Equities (www.fairmontequities.com)

Michael assists investors to achieve their goals by providing advice ranging from short term trading to longer term portfolio management, deals in all ASX listed securities and specialises in covered call writing to help long term investors protect their share portfolios and generate additional income.

Michael is RG146 Accredited and holds the following formal qualifications:

• Bachelor of Engineering, Hons. (University of Sydney) 
• Bachelor of Commerce (University of Sydney) 
• Diploma of Mortgage Lending (Finsia) 
• Diploma of Financial Services [Financial Planning] (Finsia) 
• Completion of ASX Accredited Derivatives Adviser Levels 1 & 2

Disclaimer

Michael Gable is an Authorised Representative (No. 376892) and Fairmont Equities Pty Ltd is a Corporate Authorised Representative (No. 444397) of Novus Capital Limited (AFS Licence No. 238168). The information contained in this report is general information only and is copy write to Fairmont Equities. Fairmont Equities reserves all intellectual property rights. This report should not be interpreted as one that provides personal financial or investment advice. Any examples presented are for illustration purposes only. Past performance is not a reliable indicator of future performance. No person, persons or organisation should invest monies or take action on the reliance of the material contained in this report, but instead should satisfy themselves independently (whether by expert advice or others) of the appropriateness of any such action. Fairmont Equities, it directors and/or officers accept no responsibility for the accuracy, completeness or timeliness of the information contained in the report.

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