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OILS: SUNCOR

from ChartWorks:: published by Institutional Advisors

Bob Hoye
Technical observations of RossClark@shaw.ca
May 29th, 2006

Crude Oil is entering the season where a pullback can offer a buying opportunity for a summer rally.

We have found that the oil sands stocks present one of the best correlations with the oil moves. The buy and hold strategy has obtained outstanding gains. However, within each year the seasonal runs have provided exceptional trading opportunities. Rallies through the summer months have been quite reliable.

The following conclusions are based upon an analysis of Suncor. On a daily basis, Suncor has a record of producing significant bottoms when the RSI(14) reacts in one of two manners.

• When the RSI spikes down into the mid 20’s it only takes the first uptick in the index to indicate that a bottom is in place. This occurred in June 1996, 1998 and 2001.
• The second pattern is a bullish divergence in the RSI at around 30. It was seen at the June-July lows of 1993, 1994, 2000 and 2002. As of today we have the makings of such a pattern.

Initial resistance should be encountered once the stock retraces 50% of the decline from $102.18 ($93.25 +/- $1.00). Risk should be controlled with a stop below the present lows.

Previous bullish divergences in Suncor with RSI readings around 30.

The Commodity Channel Index (on a weekly basis) can be used as an indicator to confirm that the seasonal low is in place. In years such as this that the index moved below -150 in May-June (1994, 96, 98, 00, 01, 02 & 04) the upside reversal through -100 was a good confirmation that the market had turned.

While Suncor has been used for analysis purposes, we would anticipate similar action in other oil related stocks.

Bob Hoye
May 29th, 2006

EMAIL:: bobhoye@institutionaladvisors.com
CHARTWORKS WEBSITE:: www.institutionaladvisors.com

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