Shares of energy company Tourmaline Oil Corp (TOU.TO) exited the Favored Green Zone of the SIA S&P/TSX 60 Index Report in November 2023 as they came under distribution, alongside other natural gas heavy producers. For the first half of 2024, the shares remained in the Unfavored Red Zone but began climbing the relative strength ranks, reaching the top of the Neutral Yellow Zone in the spring - an exciting development for its dedicated fan base. Unfortunately, this outperformance has not continued. The shares are now underperforming the market again, sinking back into the Unfavored Red Zone, currently positioned at #46. They have slipped 21 spots in the past month and 13 spots in the last week alone. Given this underperformance, holders of TOU.TO should carefully review and respect support levels for this range-bound stock. The last time TOU.TO fell into the Unfavored Red Zone, shares quickly lost 12.5% of their value. Early indications of underlying issues are evident in Tourmaline's relative underperformance on the RS position chart. While TOU.TO is currently trading in the middle of its range, which may seem typical, we believe this conceals the actual erosion happening beneath the surface. We’ve also noted several volume spikes on the chart, which typically indicate money on the move. Volume spikes during small breakdowns, combined with the RS sell-off (our main concern), signal to investors that it’s time to exercise caution. Support on the weekly candlestick chart is currently at $53, followed by the key level of $50, with the bottom of the range at $48.50. Below this, we only have support at $39 should a measured move materialize. Resistance is clear at the $70 level, which suggests that upside potential is capped for the now. Another special dividend from this "broken ATM" spitting out thousand-dollar bills would be timely and surely keep the shorts in control so perhaps ‘range- bound’ is the best-case scenario for TOU.TO, which is no doubt disappointing to investors. Tourmaline is a prime example of a high-quality company with strong fundamentals, yet its stock struggles to become a technical leader. As C&C Music Factory said in 1991, “Things that make you go Hmmm.”
Turning finally to the Point and Figure chart, we can visually observe the impressive rally from 2021 to 2022, followed by the sideways consolidation throughout 2023 and 2024. Resistance on the chart is initially set at the three-box reversal level of $65.28, and then at the top line of $72.08. A breakout beyond this level would likely be supported by a marked improvement in its RS chart, indicating that TOU.TO is back in play. Support is at the $50.46 and $47.55 levels, marking the bottom of the trading range. If these levels come under pressure, there is little support until the $39.01 level. Given the significant rally over the years, it’s important to note that TOU.TO is currently far from its major trend line, which raises concerns for seasoned Point and Figure chartists.
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