What Faroe needs to surge 30%

Faroe Petroleum (LSE:FPM)

Sometimes price manipulation can be useful. We’ve had a bunch of emails regarding Faroe (FPM) and it’s not difficult to understand the interest.

Basically, the share price is approaching a downtrend and it’s not beyond the bounds of possibility it’s due some sort of movement. It also provides an excuse to lecture on trend behaviour as we’ve circled a clue.

There’s a pretty valid argument which favours a new trend commencing every time the market steps in and manipulates a price by forcing it in a particular direction when the share opens for trading.

This nonsense creates a gap in the movement table, drives our software nuts due to the gap in logical progression, and gives pause for thought as we’ve generally a few days’ hiatus until we can figure out the market intent.

In the case of Faroe, a 9% gap at the open provided a pretty solid clue to the intended price reduction, not entirely a surprise given the slump taking place in the price of Crude during that period.

Currently, the downtrend since the start of 2011 is at roughly 103.231p. But the downtrend since 2014, if viable, is currently 107.5p. And, of course, the share price is currently 100p – within a sniff of a valid triggering movement. We’d guess this explains the level of interest.

If we take a look at recent dance steps, it appears movement now above 103.25p should prove capable of driving the price to 108p, a fairly useless step in the right direction. But, critically, such a target level should give the price an excuse to close above at least one of our trigger levels.

We suspect the important trend shall prove to be the one since 2011 and, thus, closure above 103.25p should prove critical in allowing us to speculate on a secondary target at around 130p.

In the event of this price level being achieved, our calculations get a bit woolly thanks to the circled gap. Conventional wisdom will assume a coming attempt to cover the gap, the computer suggests closure above 130p should expect a future 181p.

So, it has got potentials.

Visually, any attempt to stuff the price requires it to be forced below 80p, the red line, as the drop potential of 60p utterly spoils current optimism.

 

Alistair Strang has led high-profile and “top secret” software projects since the late 1970s and won the original John Logie Baird Award for inventors and innovators. After the financial crash, he wanted to know “how it worked” with a view to mimicking existing trading formulas and predicting what was coming next. His results speak for themselves as he continually refines the methodology.

Alistair Strang is a freelance contributor and not a direct employee of Interactive Investor. All correspondence is with Alistair Strang, who for these purposes is deemed a third-party supplier. Buying, selling and investing in shares is not without risk. Market and company movement will affect your performance and you may get back less than you invest. Neither Alistair Strang, Shareprice, or Interactive Investor will be responsible for any losses that may be incurred as a result of following a trading idea. 

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

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