Following my initial idea on EURONEXT:RDSA(Jan 6) I have finally opened a position at $15.00 in yesterdays trading, ahead of earnings.
Recap Jan 6, 2020
RDSA has shown an impressive performance since hitting its lows in October 2020. Since then the stock is up almost 65%. So the question that arises is, has the train left the station?
I have always liked the stock as a dividend producing block in my portfolio, however since RDSA slashed it's dividends in Q1 this year and oil prices went on the slide, I sold out. However I am increasingly warming to the prospects of the company and how radically they changed things around throughout 2020. The recent jump in share prices seem to support my thinking. RDSA seem to have understood the signs early and radically cut operating expenses, cut payouts to build a war chest for harsher times and is adapting to more sustainable energy sources.
The stock looks attractive to me on a fundamental basis and also because i currently re-allocate my portfolio more towards Value stocks, away from the crowded Growth trade.
EURONEXT:RDSA
My rational for entering now;
Support:
The entry might be a tiny bit early as technically the recent pullback could go further to test the 0.618 and the 100 EMA.
Resistance:
The 0.786 Fib ahead of the recent $17 highs
For me this is a mid to long term play, thus my SL will be fairly far out around $13.50 with a take Fprofit around the June 2020 high. However, I will adjust SL and TP to the upside should the stock show positive momentum.
***All of the above reflects my personal view and shall not be considered investment advice. Risk management is key, do not trade what you can not afford to loose.***
Recap Jan 6, 2020
RDSA has shown an impressive performance since hitting its lows in October 2020. Since then the stock is up almost 65%. So the question that arises is, has the train left the station?
I have always liked the stock as a dividend producing block in my portfolio, however since RDSA slashed it's dividends in Q1 this year and oil prices went on the slide, I sold out. However I am increasingly warming to the prospects of the company and how radically they changed things around throughout 2020. The recent jump in share prices seem to support my thinking. RDSA seem to have understood the signs early and radically cut operating expenses, cut payouts to build a war chest for harsher times and is adapting to more sustainable energy sources.
The stock looks attractive to me on a fundamental basis and also because i currently re-allocate my portfolio more towards Value stocks, away from the crowded Growth trade.
EURONEXT:RDSA
My rational for entering now;
- Stock topped out around $17 after the Nov/December
- Retreat was orderly in terms of volume and volatility which indicates profit taking
- Price is approaching the 0.618 Fibonacci level that has acted as support in Dec and Jan
- Trading at 200 EMA and we're approaching a bullish crossover on the 50 vs 200 EMA
- I like the fundamentals of the stock despite disappointing earnings from competitors over the past days. I believe RDSA has a major competitive advantage over other Oil majors with regards to a greener business model and thus should outperform in the long run
- Majority of Analysts are positive on the stock with a long term PT in the $25 area.
- Attractive dividend yield
Support:
The entry might be a tiny bit early as technically the recent pullback could go further to test the 0.618 and the 100 EMA.
Resistance:
The 0.786 Fib ahead of the recent $17 highs
For me this is a mid to long term play, thus my SL will be fairly far out around $13.50 with a take Fprofit around the June 2020 high. However, I will adjust SL and TP to the upside should the stock show positive momentum.
***All of the above reflects my personal view and shall not be considered investment advice. Risk management is key, do not trade what you can not afford to loose.***
Comment:
Solid performance amid higher oil prices and market rotation towards value stocks. Retaining my position, upping my SL level to $17 (recent top) which also would lock in a small profit in case of negative reversal.
External factors such as increased energy demand due to cold weather conditions are likely to lead to higher oil and gas prices which should boost Q1 earnings accordingly. RDSA has limited production facilities in areas that are currently suffering from severe weather (US) and is unlikely to be affected by production cuts.
I remain bullish on the stock in the medium to long term.
If the stock breaks out above $17 resistance level I will pull up my SL subsequently into the $16 area to protect profits.