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Legacy Oil + Gas is not a 'buy and forget' stock

Hello Lou,

What is your opinion of Legacy Oil & Gas Inc.?

Thank you,

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Nasko

Hey Nasko,

This will be the third time that I have examined Legacy Oil + Gas Inc. since February of 2011. The first time was on an assignment for Satinder when the shares were trading for $16.00. It was suggested that the shares had good prospects and should be allowed to run. The advance did continue but for a shorter duration than was expected. This is another classic example of why we can't simply buy a stock and forget about it. It is imperative that investors run the charts everyday to make sure that the trend is proceeding in their favor regardless of what is expected.

From the 2011 peak the shares started a retreat that endured until late November of last year.

The second assignment was on a request from Arunn on Nov. 4, 2011 when the shares were trading for $8.99. At that point it didn't appear that the stock was quite ready to reverse the downtrend but by the end of November a new upside move began. Another review of the charts will reveal what LEG might have in store for investors.

The three-year chart indicates that the late 2011 advance stalled as it met resistance at $13.00 in February of 2012 and has been pulling back for the last month. The MACD and RSI both signaled that the buying had dried up and that selling pressure was taking control of the agenda.

The six-month chart tells the tale of a stock that is generous to traders who catch the swings in momentum. At the moment LEG has caught a bounce off of the 200-day moving average and the RSI and MACD appear to be about to turn up. If you are thinking of buying at this point, watch for resistance at $12.00 and then again at $12.50. For the conservative investor LEG needs to establish a sustained uptrend.

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Make it a profitable day and happy capitalism!

Have your own question for Lou? Send it in to lschizas@globeandmail.com.

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About the Author
Lou Schizas

Lou Schizas is an equities analyst, investor, entrepreneur, professor and television and radio personality - and a true believer in the happiness-inspiring powers of capitalism. More

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