What’s The Total?
- Posted by TheArmoTrader
- on June 13th, 2012
Big oil Supermajor Total SA ($TOT) has sold off considerably over the past two months. Its trading at levels that make it a very interesting possible long position. Now, like I’ve said in the past, I am no fundamental analyst so I’m not sure which stock (from the other big oils like $XOM $CVX or $COP) is cheaper or a better buy. However, I can do some basic technical analysis.
In a conversation on twitter (about playing oil to the long side), @FullCarry mentioned to me that oil equities was probably the way to go, and suggested I look at $TOT. And you know what, despite the ugly technicals, I kind of like that Long idea as it provides a decent risk/reward play.
This play is basically betting that the multi-year range of $40-60 will hold. As you can see below, anytime Total has fallen below 45 ish, its been able to recover. Despite being below all major monthly moving averages, a long here with a stop ON A CLOSE below 40, makes this idea a good risk/reward trade. Given that the volume has been huge lately, and that Europe is in a recession officially, there is a decent chance it breaks down. But if it holds and bounces off from these oversold levels (check RSI) like it has in the past, I’d expect a quick run up to $50 (where that down trend-line is). Taking some off on a run up to $50 would make sense. If it breaks out, I’d expect a nice squeeze up to the top part of the range of $60.
The monthly RSI is oversold, its trading in the bottom part of the range (support), and it offers a nice fat yield of 7% (yield-chasers should jump in here soon). Some decent stuff working for you for the long trade (However, don’t forget the ugly technicals, so keep your stops ready!).
I’d probably scale into this trade in two halves. Don’t forget, this stock is an ADR (American Depository Receipt), which means there will be gaps because it follows the movement of the security it tracks (it’s listed stock on the Euronext Paris Stock Exchange).
$TOT - Total SA Monthly Chart
The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.blog comments powered by Disqus
Jerry Khachoyan is currently an undergraduate student at UCLA pursuing a degree in Political Science. He started trading in September of 2008. He concentrates on using technical analysis and reading the tape to enter the best risk/reward trades. The stock market to him is one of the greatest inventions by man.
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