Woodside's gas balloon is a swell stock after GFC bust
It's not all plain sailing, though, with controversy erupting over the environmental sustainability of tapping coal seam gas deposits; and Woodside, the subject of this week's column, has met resistance from environmental, indigenous and community groups over its plans to build a liquefied natural gas (LNG) plant at James Price Point near Broome.
This week's chart has been produced by Gary Burton, a member of the Australian Technical Analysts Association and a broker with Wilson HTM. It shows the boom has by no means delivered big returns for long-term holders of Australia's largest independent oil and gas group.
Before the financial crisis, Woodside was at a high of $69.93 and, as the chart shows, a downward trend line developed, which is still in place. But it hasn't been a steady ride down.
After the fall from the pre-GFC high, a support level emerged at $40. The price fell through that level in June 2011, reaching a low at point 1 of $29.69 in September 2011. This was about $3 above the post-GFC low reached in November 2008 (not shown on this chart).
The price fluctuated over the next 10 months, making two more sharp drops at points 2 and 3. Burton says that when price movements make three lows in succession it is highly likely that a base price has been established. So far the chart confirms this view, as the price has risen considerably since then.
Indeed, it has established another small support level at $32.88, which has been tested a couple of times; and while this happened, an upper resistance level of $36.07 was established. The price broke through that early this year and for a time even went through the post-GFC downward trend line shortly before it went
ex-dividend.
Now the price has broken back through the $36.07 level and is back in the trading channel formed last July, with $32.88 again the support level. So, what can we expect from here?
As the line from point 3 shows, Woodside appears to be in an uptrend, although this has been tested in recent days. If there are further falls but the $32.88 support level holds, that will be a good sign. A move above $36.07 would represent "a strong buy signal", Burton says.
On the fundamental side, Woodside's profit jumped 24.5 per cent for the year to December 2012 on revenue up 32.2 per cent and its dividend yield is 3.7 per cent.
This column is not financial advice.
rodmyr@gmail.com
Frequently Asked Questions about this Article…
Australia is in the middle of a large gas boom, with around $180 billion being spent on gas infrastructure. That sector strength, plus Woodside's position as a major independent oil and gas group, helps explain investor interest in Woodside shares.
Technical analysis in the article highlights a support level around $32.88 and an upper resistance level at $36.07. The price has traded inside a channel formed since last July, with $32.88 repeatedly tested as support.
According to analyst Gary Burton’s chart work, a decisive move above the $36.07 resistance level would represent 'a strong buy signal.' Conversely, holding the $32.88 support on pullbacks would also be a positive sign.
Yes. The chart recorded three successive lows—culminating in a low of $29.69 in September 2011—which Burton says often indicates a base has been established. Since then the price has risen and formed a small support level at $32.88.
On the fundamentals side the article notes Woodside’s profit jumped 24.5% for the year to December 2012, revenue was up 32.2%, and the company’s dividend yield was reported as 3.7%.
The article mentions that Woodside’s price briefly went through the post-GFC downward trend line shortly before the stock went ex‑dividend, suggesting dividend timing can coincide with short-term price moves.
Yes. The article points out environmental, indigenous and community groups have opposed Woodside’s plans to build an LNG plant at James Price Point near Broome, and there is broader controversy about tapping coal seam gas—these social and environmental issues can pose risks to projects and reputation.
No. The article explicitly states that the column is not financial advice, and the chart commentary is an analysis rather than a personalised recommendation.
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