It has been a rough couple weeks for Oil & Gas explorers, and Jacka Resources was no exception. The stock price was punished last week, against all logic – given that Jacka have:
- Received ministerial approval for the Ruhuhu block in Tanzania (Jacka will be Operator with 100%) and
- Just commenced the much anticipated drilling of their large appraisal well in Tunisia (contingent resources in excess of 100 million barrels), with results expected in the next few weeks.
This recent market carnage has thrown up an excellent opportunity for investors (and traders), because when a stock with upcoming drilling results has been so oversold in a terrible market… you can be sure that investors will be piling back in once the market settles down, their fear is replaced by greed and their sudden realisation that drilling results are just around the corner!
The team at The Next Oil Rush were so perplexed by the Jacka stock price that we did some investigation to find out what on earth is going on – and we are confident that there may be a bounce back in the very near term – and here is why:
First of all, what happened with the stock price? Fear and a (rumoured) forced institutional seller
The shocking bloodbath across the junior sector last week may explain the Jacka stock price weakness, with rumours of a forced institutional seller exasperating the situation. Some participants in the December options underwriting (who got in at 20c) probably started freaking out when they saw the price suddenly falling, further adding to the selling pressure.
This perfect storm of carnage resulted in a 30% drop last week, on relatively small volume. We note that the drop in stock price was nothing to do with any negative material event announced by the company.
But storms do pass. We are expecting a significant bounce back by Jacka in the coming weeks (possibly a trading opportunity here) leading up to the drilling results. On a positive note, we also hear rumours that the forced institutional seller has finally offloaded all their stock as of a few days ago, which if true would remove a significant amount of pressure on the stock price. We may even see a few of the trigger happy sellers from last week sheepishly buying back in once they have cooled their heads and got their nerve back.
How many times has fear caused you to sell out of a stock on a bad week, only to regret it a few weeks later when everything is back to normal? Take the advice of Warren Buffet:
“Be Fearful When Others Are Greedy and Greedy When Others Are Fearful.”
The small cap explorer market was certainly fearful last week – especially with Jacka. Hopefully you took advantage of the fear… so what is going to change the market back to being greedy…?
Why should Jacka bounce back in the near term – Drilling, Drilling, Drilling!
Everyone loves a good drilling result, and with Jacka’s much anticipated Hammamet-3 appraisal well in Tunisia having started drilling last week, we are only a few weeks away from knowing the result and potentially only days away from hearing about initial oil shows (finger crossed). Jacka have promised drilling updates EVERY WEDNESDAY – we are hoping for early oil shows in the drilling results which is always well received by the market.
How many times have you seen an oil explorer’s stock price rise in the weeks leading up to drilling results? We believe Jacka will be no exception, and starting from such a heavily oversold position should prove for a very interesting few weeks, especially with their promised weekly updates.
The weakness in the share price over the last few weeks has thrown up some amazing opportunities.
The Jacka value proposition is still as strong as ever (take a look at our original Jacka article here for a reminder) and we are still extremely bullish for the longer term. The stock is currently heavily oversold and trading well below its fair value, so could be a nice trade for those with a short term view (however, always remember the risks when drilling!), or an excellent entry point for those who are happy to stay for the longer term (like us).
We are confident the price will be bouncing back in the near term, especially with rumours of the forced institutional seller finishing their offload, and lead up to drilling results – The Next Oil Rush will be watching with great interest over the next few weeks.