After surging higher in March shares of Jericho Oil (TSX-V:JCO, OTC:JROOF) have come under heavy selling pressure, erasing its gains for the year. From my vantage point the selling doesn’t make much sense because JCO continues to advance its STACK farm-in play. This farm-in, which was announced in January, increases JCO’s STACK acreage footprint to ~13,000 total net STACK acres; the first of two required wells in the farm-in has been fracked and is currently being stimulated:
Moreover, Jericho is poised to deliver strong year-over-year production growth through its 2018 drilling program. Another thing that I love about the Jericho story is the strong insider ownership (46% of shares outstanding are held by insiders) and big money financial backers (Breen Family Trust, Gibralt Capital, Mike Graves).
I believe the recent selling has been led by a couple of parties who may have sold out of impatience, just as Jericho Oil is in the midst of its most transformative year in its brief history.
From a technical perspective I can’t say that the price action since the March peak is what we’d like to see, however, the long term trend is still clearly to the upside. While the stock has just dipped under its 200-day moving average, JCO is now testing a critical area of long term support/resistance:
JCO (January 2016 – May 2018)
Jericho is now also officially the most oversold it has been in the last three years (daily RSI/CCI at new lows). It is also important to remember that the slope of a moving average is more important than whatever level a moving average may be at on a given day. I believe that the recent weakness may be a gift just before Jericho delivers a steady flow of drilling news from its highly prospective Oklahoma STACK plays.
Disclosure: Author of this article is long JCO shares at time of publishing and may buy or sell at any time without notice.
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