Where next for this struggling oil stock?

Gulf Keystone has fallen from favour, but our columnist thinks recovery is possible.

Gulf Keystone

We reviewed Gulf Keystone (LSE:GKP) last September, an article which generated no email complaints or threats. This probably signifies how far GKP has fallen from favour, once being the poster child of a bunch of internet warriors.

Now we're quite pleased the share triggered, and successfully achieved, both our target levels from September.

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In fact, GKP is now soaring well above its previous den of lethargy, doubtless reflecting on the current optimism in the crude oil marketplace.

To be fair, Gulf Keystone’s share price has mimicked movements against crude pretty closely since April 2020 with the result that we're able to calculate $74 (£54.4) as a viable ambition for Brent crude.

Perhaps it shall make sense to keep an eye on GKP in the hope the price continues to follow a similar trajectory.

It must be remembered that GKP, presently trading at 147p, is really priced at 1.47p thanks to the 100:1 share split in 2016.

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By no stretch of the imagination is the price respectable, but that doesn't mean to say it cannot experience some further recovery. Unfortunately, we doubt we will be able to offer succour to those trapped since 2012, needing the price to now recover above 400 quid to break even. We're unable to spot early signs of such a miracle.

Near term, trading above 158p looks capable of triggering some further gains, calculating with an initial potential at 171p with secondary, if exceeded, at 186p.

We'd strongly advocate keeping a weather eye on the price of Brent in this scenario, expecting hesitation should GKP achieve 186p around the same time Brent hits the $74 level.

We're a little less comfortable with a ‘big picture’ scenario, one which demands GKP close a session above 186p in the future to trigger happier days. Allegedly, such a miracle ticks the first box in a train of events which allows a distant-sounding 239p.

If it all intends go wrong for GKP, the price needs to reverse below 127p. Such a movement would require a long hard look at the tea leaves again.

Source: Trends and Targets. Past performance is not a guide to future performance

Alistair Strang has led high-profile and "top secret" software projects since the late 1970s and won the original John Logie Baird Award for inventors and innovators. After the financial crash, he wanted to know "how it worked" with a view to mimicking existing trading formulas and predicting what was coming next. His results speak for themselves as he continually refines the methodology.

Alistair Strang is a freelance contributor and not a direct employee of interactive investor. All correspondence is with Alistair Strang, who for these purposes is deemed a third-party supplier. Buying, selling and investing in shares is not without risk. Market and company movement will affect your performance and you may get back less than you invest. Neither Alistair Strang or interactive investor will be responsible for any losses that may be incurred as a result of following a trading idea.