Buying Opportunity In Santos

This story features BHP GROUP LIMITED, and other companies. For more info SHARE ANALYSIS: BHP

By Michael Gable 

Yesterday was the lowest volume day on the ASX for this year as the market started jumping at shadows, that is, the index was being driven by a market with one eye on the Dow Futures. So while it is telling us that the afternoon sell-off should be taken with a grain of salt, it still hasn’t changed our view that October represents more downside than upside as our market could see about 5% get taken off its recent highs. Whilst the government shutdown is making the headlines, we are more concerned with the 17 October deadline for the US to increase its debt limit. Otherwise we may see a temporary default, the first since 1979. Either way, there seems to be enough reason for markets to ease back and get cheaper. For example, when we looked at BHP Billiton ((BHP))  a few weeks ago, it was trading at $36.20, the market was rallying to new highs and everyone was bullish. At the time we told investors to be patient and wait for levels closer to $34. Well it is nearly there so that is one example of a stock worth looking at closely now. This week in our report we have looked at the Australian gas market where stocks with exposure there have served us well in the last several months. Amid the market malaise we have also found a couple of companies which have some great upside potential from here.

Santos (Weekly)

 

The trend in the last 12 months has been very strong for Santos ((STO)). We have seen some very nice impulsive moves up on good volume and the pullbacks have been very corrective. There was always going to be strong resistance near $16 and we saw the share price reach an intraday high of $15.80. When it reached that high a couple of weeks ago, you will notice that it was on the back of a solid move on good volume. Firstly that concerns us in that it may have been a final exhaustive move for the time being. Secondly, you will notice that in the last two years, the peaks and troughs in the share price have coincided with sell and buy signals respectively on the RSI (circled). Once again we have seen a sell signal on the RSI. We could get one final retest of $16, but chances are that we should expect STO to ease back now. We are looking at support around $13.50 at which point it would be a buying opportunity.
 

Content included in this article is not by association necessarily the view of FNArena (see our disclaimer).
 
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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