Forget both the technical charts and the fundamentals. Investor fear and/or exuberance controls the share price. But, investors should buy or sell based on fundamental values and use the charts to check to see if a stock is moving up and down accordingly. But since fear and exuberance are two values that move the market the most, sometimes investors need to follow the crowd no matter whether the crowd is right or wrong.
However, there are times when the wise investors needs to stick to the fundamentals and let the technical charts and the crowd go their own way.
This is exactly what is going on with ESV share price. Investors got exuberant and the price run up too high. Then all the talking heads on Bloombergs TV, plus the cancellation of one lousy rig contract, and the recent drop to $26.50 for a barrel of WTI scared ESV investors and the price shot down into oversold territory.
At this point in time, ESV has a Relative Strength Index of only 31 signaling a quick return to about $9.25 per share.
Many talking heads on Bloombergs love to point out the oversupply of crude inventory. If you counted the times Bloombergs delivered the financial news without throwing in little digs designed to depress longs, your number would be very low indeed. These idiots work for the short side of the market, not the long side. It's easier to convince the average investor that the sky is falling in a down market than it is to convince them an upturn is on the way.
It is true that oversupply of crude should reduce prices if you are looking at the short term. But this ain't the way the oil services (OS) sector works. If you buying OS companies you need to be looking at where oil will be next year. Forget the next few months. The smart OS investor knows that the most money is made by those they get in at the bottom of a downturn. I've made a lot of money buying beat up oil service stocks at the bottom. Sure crude will bounce up and down many more times in the next 60 days and so will ESV. But if you get in now under $10.00 and hold tight, you could easily see a triple in one year. I can guarantee a double for sure, and likely in 6 months.
Frankly, I see an extreme shortage of crude coming. We could run up quickly to $150.00 barrel. Here's why... most of the world's crude comes for mega oil deposits found 40 years. This fields are old and need to be worked on a regular basis if they are to continue to produce. The down turn caused producers to back down on spending. This will hurt when demand moves higher. I compare this to the North Sea. The area could make a come back with large drilling investments but the majors are looking for new giants in calmer seas, not the old ones. If we lose 4-5 old mega fields, then drilling day rates could run to the moon.
And, there is a lot of offshore rigs coming out of service right now. A lot of smaller companies can not afford to maintain the ones they must park. Rust will destroy these rigs in a few months. Other companies are scraping a lot of rigs for salvage value. SeaDrill is in deep dodo and may not survive. ESV, RIG, and DO are the survivors. ESV bought Pride in the last downturn and might even have a go at SeaDrill. Whatever happens ESV will emerge much stronger than before.
