Forest Oil Weekly Analysis

• Posted by Greg Harmon
• on July 9th, 2011

Forest Oil (ticker: $FST) has been a great study for Technical Analysis over the last 3 years giving many true signals. Look at the weekly chart below. There are two sets of Fibonacci lines measuring from the 2008 high to the March 2009 low in the purple and from the March 2009 low to the February 2011 high in gray. There are also a set of bullish (blue) and Bearish (orange) Andrew’s Pitchforks.

The first signal came at the end of June 2008. It printed a Shooting Star candlestick signaling a potential reversal and then confirmed it the next week. Also the Relative Strength Index (RSI) had peaked over 80 and started to fall, reinforcing the signal. It then fell over 87%, a pretty good signal. The next signal came as it was bottoming in January 2009. The Moving Average Convergence Divergence (MACD) indicator crossed positive and shortly after the uptrend that took it from 10.33 to 40.23 began. Now move on to the purple Fibonacci levels. Notice that the run higher off of the bottom stalled first at the 23.6% retracement of the major down move and then advanced to the 38.2% retracement, before falling. As the price hits these retracement levels it is time to be cautious of a reversal. Not time to take off the position but time to get cautious. As it started to fall from that level the volume increased reinforcing a reversal. This turn allowed the placement of the bearish Pitchfork which it has been following lower. The blue Pitchfork is still a myth at this point but would be valid if the move lower stopped and reversed now, otherwise the width will continue to increase. With the massive volume candle for the past week and the RSI at the technically oversold level, this is a possibility with a blow off bottom. Note though that it found some support near the 50% retracement of the move from the March 2009 low to the February 2011 high, shown with the gray levels, but now looks to be moving lower. At this point, look for a continued move lower to the 61.8% Fibonacci retracement at 21.75. There is some congestion from late 2008 into 2009 then below that between 15 and 20 that could give it a base.

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