Technicals | Sep 13 2017
Bottom Line 12/09/17
Daily Trend: Down
Weekly Trend: Down
Monthly Trend: Down
Support Levels: $27.69 / $27.01 / $25.63
Resistance Levels: $33.97 / $36.94 / $38.89
Woodside Petroleum ((WPL)) is Australia's blue-chip oil and gas player with significant and successful exposure to the LNG sector. Its competitive advantages are its significant reserves of low-cost and expandable gas fields off WA. The Company operates in five parts; North West Shelf Business Unit, Browse Business Unit and Australia Oil Business Unit to name just a few. In June 2014, Royal Dutch Shell plc sold 19% in Woodside. For the six months ending the 30th of June 2017 revenues decreased 4% to $1.87B. Net income increased 49% to $507M. Revenues highlight the Pluto business unit section decrease of 8% to $1.03B. Net income shows an exploration and development Cost decrease of 67% to $62.7M. Exploration and evaluation expenses decreased 59% to $52M. Broker consensus is “Hold”. The dividend yield is 3.4%.
Reasons to be neutral:
→ Cost reduction initiatives in place.
→ Prevailing weakness expected in LNG markets.
→ Senegal offers longer term growth opportunities.
→ Expansion at Pluto is looking more likely.
→ Cash flow remains robust from existing operations.
→ Recent acquisitions are encouraging and increases the chances of exploring the back fill of North West Shelf.
→ The company is trying to shed its ex-growth tag.
We were concentrating on the weekly chart last time which showed price had just headed down into the typical retracement zone. On the face of it this is a bullish proposition although the problem was the speed of the pull-back which was looking decidedly impulsive in nature. Price is still hovering around the 50% – 61.8% retracement zone on this daily timeframe although this also highlights the strong leg down that commenced in April of this year. We could even count the recent leg lower as a 5-wave movement which at this stage of the trend should not complete the whole corrective pattern. In other words, even if a few buyers start to enter the fray, it could well be that a larger corrective pattern higher is going to take place as opposed to something more bullish longer-term.
On the positive side of things Type-A bullish divergence is in place although thus far it’s failed to inspire a significant rally. Our oscillator is also sitting deep into the oversold position on the weekly chart (not shown) although this doesn’t mean a great deal without the divergence. One thing is for sure, a push beneath the 61.8% retracement level at $27.69 will be the final nail in the coffin and likely result in a continuation down to the significant lows made in April of last year around $24.00. This wouldn’t be ideal from an Elliott stance as it would mean the rally up to the high made in mid-April has been nothing more than a bounce. The bottom line is that plenty of caution is required here.
The energy sector is still struggling for traction although we do have exposure through BPT with the patterns continuing to unfold nicely. As long as oil can hold itself together we’ll continue to run with that trade whilst allowing it room to breathe. Regarding Woodside, it goes without saying there’s no reason to want to be involved which is result of the strong leg down over the past few months. Should the bullish divergence prove to be significant there is room for a decent bounce although there isn’t enough in it to warrant a formal recommendation. It’s best to continue to stand aside from this one.
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