Just starting out first by saying that I’m not a shorter/downramper or anything of the sort. There will be some negative comments in my comment below (macro) but taken in overall context for FAR, it might even be positive, as FAR has not been hit.
I’ve mentioned some points referring to the serial number in my original comment for easy reference.
As mentioned there, most of the thoughts have been accumulated over the year, and I’ve been following WTI closely all year round. Some points I mentioned in my oil macro analysis came very true –
a) I spoke of importance of 40 level and how oil should race away from the 40s to give confidence. Indeed as soon as I passed my comment, oil raced off to one of the biggest 3 day rises in 25 years, and bumped its head against the 50 level.
b) I had also warned of many further bearish issues in my comment however and oil continued to fall since (after hitting its head agains the 50 level) and stocks continued to get hammered.
c) I also spoke of how I’ve been meaning to write that analysis ever since oil fell below 50 in July and indeed 50 has again proven to be a resistance. Anyone following oil closely will know that oil made a couple more attempts to cross 50 and fell short before the last attempt where it once more bumped its head on touching the 50s.
2) Some points very relevant for whole sector going forward
Point 2 of original comment- 25 year support and resistance and historical level of 40
Like I mentioned there, this this is the make or break zone for oil. If it falls below, do not entirely rule out the 20s and 30s predictions of some analysts which might seem crazy. (Last June if you told someone that oil would be close to 40 next October, they’d probably call you crazy)
3) Point 4 of original comment - Commercial hedgers (smart money) shorts –
Like I mentioned there, the short position of smart money is still huge. Not a good sign for crude at all http://www.finviz.com/futures_charts.ashx?t=CL&p=d1
4) Point 5 of original comment - Large traders (negative for oil) -
Like I mentioned there, that if oil falls, they would be following the trend, and exacerbating the fall.
5) Macro factors – Macro factors are still very bearish according to me and only going to get worse. Definitely not going to get better over time.
6) Point 8 of original comment - Oil fall due to rising DXY
As mentioned there, oil bears an inverse relationship to US dollar index. US dollar index has been increasing lately, thereby worsening the fall for oil. This will continue to be key going forward although it is hard to say where things will go from here.
7) Point 19 of original comment - Global oil glut
Global oil glut IMO looks set to continue. It could ease for some time but with more oil going to come from Iran too in the time to come, it looks set to persist.
8)Points 13-16 of original comment – Major players
As mentioned in the original comment, US, Saudi, Iran and Russia are the main players. It remains to be seen how they all deal with the matter. These 4 players are the main players and IMO will continue to decide the fate of oil, in their own struggle for power.
9)Point 22 of original comment – Worsening geopolitics Worsening geopolitics could always lead to a "big war" as I mentioned in my original comment. Indeed, we can see a very tense situation in Syria in recent times that has drawn all these 4 countries that are not only battling an oil war but situation between them is getting tense in Syria. Although this is oil positive, we should all hope that this never ever happens.
10) Points 24-29 of original comment – Prolonged bear market and resultant impact
Keep in mind that oil could have a prolonged bear market like gold, which could cause a lot of pain for energy stocks.
11) Conclusion
I’m bullish on oil in years to come but there could still be a lot of pain before that. I’ve gone into oil in far more detail in my original comment, and have just touched on some important points here.
Oil glut seems set to continue at least through 2016 unless there is a major war (which we should all hope never happens)
IMO, the US dollar and potential US QE continues to be a key determinants of where oil could go in the time to come.
Oil is looking ready to test the 40 level once again. How it reacts at this level is key. If it makes a hard fall at this level, then even the 30 level cannot entirely be ruled out.
I’m very bearish on overall macro in the time to come. See how quickly oil fell from 150 to 40 around the time of the GFC. Thus, if a “Lehman moment” ever comes in the time to come, (which I feel is quite likely at some point), oil could have a sudden sharp fall. Needless to say, if oil is still around 40 at that point of time, a sudden sharp fall could cause a lot of chaos.
Note that oil is too macro and all situations I mentioned above can change in a minute if the 4 major players change their game plan.
12) Relevance to FAR
Time for some good news now.
On Aug 27, I linked my oil macro analysis on 5 energy stocks – FAR, STO, LNG, WPL, SXY for various reasons including volatility despite decent market caps (STO, LNG), HC hot favourites (LNG, FAR), well recognized large caps (STO, WPL), badly beaten down stock (SXY), etc.
Note that I own no energy stock at the moment –so no cross promotion in any way definitely.
FAR has risen 37% since then, SXY has risen 51%, STO risen 24%, LNG fallen 35% and WPL more or less same.
Not surprising that SXY has shown the biggest rise since it was most beaten down. STO obviously rose due to the takeover offer.
If you see the chart since then, FAR’s performance has been one of the most stable, and I’m impressed because of this. The other stocks got hit very bad initially in September when oil started falling again. FAR was much more stable.OSH has been one of the few other energy stocks that I follow to be somewhat stable. OSH rose 22% since Aug 27; BPT fell 5% and DLS rose 14% (Please recheck all figures above as I just noted them down quickly after feeding into google finance)
I’ve not been following many energy stocks in detail because I’ve simply shunned the energy sector as a whole because of my overall bearishness but seeing how FAR has been stable in the past 2 months, this is surely one stock I’d like to know more about in time to come.
@insaf@whisky49 – 2 of you are the 2 main familiar names I see here, and whose comments I always appreciate a lot, as you both already know. Any comments from on some good commenters whose comments you guys generally rely on here, whether there is any good overall complete FA summary of FAR, what is the upcoming good news, etc. Thanks in advance.
Anyone else also familiar with FAR – if there is a good FA overall summary of FAR, I’d love to read it. Thanks in advance.
Note that like I said, I don’t know much about FAR. So, please ignore my overall bearish tone about oil as that is just part of my oil macro analysis, and has no impact whatsoever on FAR's short term prospects of which I am completely ignorant.
I just thought I’d share it with you guys that FAR was actually one of the better and more stable performers over the last 2 months of chaos.
Cheers and all the best to you guys - hope you make some good money and I hope I can be a part of this stock in the time to come
FAR Price at posting:
8.6¢ Sentiment: None Disclosure: Not Held
(20min delay)