Tullow Oil stock analysis: is the best already over or yet to come?

The Tullow Oil share price analysis shows the stock is in a corrective phase but the path of least resistance seems to be on the upside

The oil and gas sector had been in the doldrums in 2020 as the stay-at-home diktacts across the world led to a sharp reduction in oil consumption. That had resulted in Brent crude oil prices dipping below $17 per barrel in April 2020. Due to the sharp drop in Brent crude prices, most oil and gas companies were struggling for survival and their share price had been hammered.

However, with the reopening of the economy in most parts across the globe, oil demand has picked up and so has the sentiment in the sector. 

Tullow Oil (LSE: TLW) is mostly focused in West Africa. The company recently said it had restarted drilling operations in Ghana, which is expected to generate significant cash flows over the next decade. 

The company has guided a production of 60,000-66,000 barrels of oil per day for 2021. This is expected to earn the company an operating cash flow of about $500 million assuming an average crude oil price of $50 per barrel. This will be a massive improvement over the performance of the previous two years where the company had incurred a loss of $1.69 billion in 2019 and $1.22 billion in 2020.

In other positives, the company has been looking to pare its debt by selling its assets and it has re-entered the FTSE 250 index after the most recent index rebalance.

With crude oil prices moving up and Tullow starting operations in Ghana, the company seems to be on the path to recovery. Will Tullow oil stock go up? Let’s perform the Tullow oil stock price analysis of the weekly chart to find out.

Tullow Oil share price technical analysis – weekly chart

Tullow oil stock analysis weekly

The Tullow oil share price rallied sharply from £0.134 in September 2020 to a high of £0.653 in March, realising a gain of 387%. However, since then the stock has been in a corrective phase. 

The bulls are trying to arrest the decline in the support zone between the 38.2% Fibonacci retracement level at £0.455 and the 50% retracement level at £0.394. 

If the stock rebounds off this zone, it will suggest that the sentiment remains positive and the bulls are accumulating on dips. The gradually upsloping 20-week EMA and the relative strength index (RSI) in the positive territory indicates the bulls have the upper hand.

The first target objective on the upside is a retest of £0.653. If the bulls can thrust the price above this resistance, the up-move could extend to £0.955. This bullish view will invalidate if the bears sink and sustain the price below £0.394.

The Tullow oil stock price analysis of the weekly chart shows the stock is currently in a correction but the trend favours the bulls. Let’s perform the TLW stock analysis of the daily chart to see if it also projects a similar bullish view.

Tullow Oil share price technical analysis – daily chart

Tullow oil stock analysis daily

The stock is currently trading inside a descending channel. The moving averages are on the verge of a bearish crossover and the RSI is trading below 46, suggesting the bears have the upper hand.

 If the bears sink the price below the support line of the channel, the selling could intensify and the stock may drop to £0.338 and then to £0.306. 

On the contrary, if the price rebounds off the support line, the bulls will try to push the price above the resistance line of the channel. If they manage to do that, the stock could start its northward march.

Tullow oil stock: buy or sell at these levels?

The Tullow oil share price analysis shows the stock is currently in a correction but remains strong. Traders may consider buying the stock on a breakout and close above the channel with the initial stop-loss kept below the channel. The stops could be trailed higher as the price moves up.

On the other hand, if the price breaks the support line of the channel, traders may step aside until the stock finds a bottom. 

 

Trade Tullow oil – Tullow oil share price

Tullow Oil PLC
Daily change
0.472
Low: 0.463
High: 0.475

FURTHER READING: S&P 500 technical analysis: time to book profits?

FURTHER READING: Palantir stock analysis: the bears may be planning a serious assault

 

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