TM editors' note: This article discusses a penny stock and/or microcap. Such stocks are easily manipulated; do your own careful due diligence.

Some months ago, I proposed that oil prices were experiencing a head and shoulders reversal. I use technical analysis in my investment decisions, and the chart that gets me most excited is the inverted head and shoulders, a topic I mentioned in an earlier column. The pattern is still intact. Prices hit a low of US$37 last August, but continue to dither in the $50 range.

I continue to make money outside the energy sector, but I am holding a few – Cenovus (CVE), in particular. However, I recently bought some Altura Energy, based on its fundamentals as much as its chart. You’ll notice that it made a significant breakout through C$0.33 at the beginning of this year, then played around in that area, with PPO in the lower panel going bearish.

Today, however, that changed. The 26% bump in the company’s stock price was a response to the following news in its first quarter financials, which reported corporate production of 1,016 barrels of oil equivalent per day, from capital spending of only C$9.0 million.  

At Leduc-Woodbend, the company’s second well (placed on production in late March) produced an average 177 barrels of oil equivalent per day, 92 per cent of it oil. This well was drilled 10 kilometers north of its original exploration well and confirms the presence of a productive reservoir across much of the company’s 52 sections (about 33,000 acres) of land in the area. As one of the newsletters I study added, the company trades at three times cash flow, and has no debt.

The downside? It’s a microcap, so too much publicity could cause it to get ahead of itself. Be careful!