Wednesday, December 16, 2009

A Volatility Squeeze Play: KAZ

First a chart of our subject. This is a weekly chart of KAZ. I like to look at weekly charts when I do my scans.
(click to make larger)

I found KAZ in doing a sector view of Basic Materials: Independent Oil and Gas. I looked through every chart, and this one caught my eye. I guess you could say that I felt that I was shopping at the Dollar General store, because the stock price is just slightly above a dollar. Here's a summary of what KAZ from their website:

BMB Munai, Inc. (BMB) is an independent oil and gas company engaged in the exploration, development and production of crude oil and natural gas. The Company"s operations are primarily focused onshore in proven oil and gas producing territories of Caspian Sea region of the Republic of Kazakhstan.


Here's what I liked:
  • Volume constructive in October.
  • They've reported already, so bad news surprises were unlikely.(To be fair, though, I did read that they were working out their loans. Their balance sheet looked strong enough, so I didn't feel that there was much downside risk. Nevertheless, I included it below).
  • The Bollinger Bands (not on the chart) are narrowing and are inside the Keltner Channel. I believe a move is building steam.
  • I like the Volume by Price distribution....it's bottom heavy and there is some airspace above.
  • The stock took a hit when they had to issue one of the deadly "financial statements are not to be relied on" press releases. The subsequent restatement was positive.
  • The stock is trading at .26 of book value and it has positive equity.
Here's what I'm neutral to mildly disliking:
  • Institutions were bailing out on KAZ. At less than $1 per share, it becomes I tough hold--but...maybe that bailing created a fire sale.
  • They have some debt that they are trying to negotiate (see above). It needs to be reiterated here though.
Pluses outweighed minuses. This is spec money, so I took a position on Monday at an entry of $1.07. Had I been more patient, I could have had a better entry price for that day. Today the action was quite favorable.

I recently posted about HPJ. Perhaps I'll have a chance to see if I can follow my own codified rules. Stay tuned!

Position: Long KAZ @ 1.07

6 comments:

Diesel said...

Hi there, thanks for your analysis. I entered KAZ back when it was $1.30 2 months ago. Still holding and overall I think the trend is bullish. Watch this space :)

Biffermas (Chris) said...

I like this setup for many reasons. A few comments regarding KAZ, for what it's worth:

http://www.screencast.com/users/BiffermasSOH/folders/Jing/media/b6bf8a90-7c8e-43af-a11b-09209be98046

Leisa said...

Diesel: Whatever move we have, I think will happen soon. Good luck and thanks for your comment.

Biffermas: I think that swan dive was an exit by institutional holders--there was one big one. While I should have noted, sometimes stocks go up for the simple reason that there is no selling pressure.

viscous said...

Meh!

Biffermas (Chris) said...

Does it smell like a skunk has been here spraying indifference?

viscous said...

Meh!