Last summer, Gazprom stocks showed an excellent upwards dynamic and finally broke the sideways channel where they had been moving for several years. From the technical point of view, nothing extraordinary happened: as soon as the price is leaving a sideways channel, volatility is increasing and they may easily cover the distance equal to the width of this channel in the direction of a breakout. This is exactly what we’ve seen in the Gazprom chart
However, bulls couldn’t support the uptrend for a long time, so right now the price is rebounding from the resistance area close to 250. In general, there are several good pieces of news that may help bulls break this area and fix above it. In this case, the upside target will be at 370. If it happens, the stock may return to the “pre-crisis” time of 2008.
Positive for further growth
A lot of investors notice the interest of foreign investors to the Russian stock market: it is underestimated, but there are good chances to continue the trend of 2019 this year. The stocks were growing even at the time of decline in the company’s net profit, which lost 27.7% if compared with 2018.
The profitability of similar international papers is about 20%, while the Russian ones earn a profit of 7%. Here we saw both growth of oi prices and sideways movement, but nothing plunged, thus pushing investors to buy stocks at the time of global economic stability. Moreover, even the Russian Ruble rose against the USD from 61 to 69.
A positive moment here is revised dividend policy. It is meant that at year-end 2021, shareholders may expect a 50% net profit as dividend payouts. Of course, this will be brought into force in stages but may provide strong support to the company’s securities.
What may be negative for growth?
Falling oil market may cause serious risks as they forced a correction to the downside, which can be seen for the last several days. The price rebounded from the resistance area at $71 and reached the support at $55.85. Breakout of this area may push the price downwards to reach $50.
If bears do break $50, they will break the rising channel’s downside border and test $45. However, if the market rebounds from $50 and bulls are able to keep the price above $55 again, the instrument may continue growing with the predicted target at $85. January of 2020 was pretty aggressive when it came to oil prices decline and pressure on the Russian stock market. Moreover, the Ruble also responded by a strong rebound from $60.
This winter is quite warm and many analysts are talking about the decline of gas supply. Natural-gas prices also continue falling: they are very close to the levels of 2016 and that may put some pressure on the price of Gazprom stocks. However, from the technical point of view, the current decline lower may force a rebound and a potential target of this movement may be at 3.00.
Another negative moment is the decrease of recommendation from Merrill Lynch. Analysts recommend to hold stocks but give no predictions on buying them. First of all, such estimation and recommendations are given due to expectations implying a further decline in gas prices throughout the entire year of 2020.
Well, the prices are really low here. Still, a bit earlier we talked about a possible rebound from the technical point of view, but there must be a confirmation before we may assume a new growth. Possibly, the prices may fall much deeper before the market is able to reverse. In addition to that, foreign analysts mention a sizeable improvement of competition in Europe and increase in stocks, again due to a warm winter. Another negative thing is a significant expansion of liquid gas production.
Long-term analysis of Gazprom stocks
If we look at the weekly chart, there is a rising channel and the price is “clinging” to its upside border right now. As we can see, bulls weren’t strong enough to push the price past 280, thus breaking the channel’s upside border and forcing further growth. In this case, the price may have tested easily test 360 or even higher. Probably, there was some strong pressure from oil prices decline in January, as well as the new Chinese coronavirus outbreak
Moving Averages also indicate a strong rising tendency; we should note that “Golden Cross” in March 2019 was the first one since 2008. It may be a strong signal to resume long-term bullish trend in the stock.
A good support line can be found close to 175-200. As we can see, this area is well visible on the price chart itself. Also, if we pay attention to the rising trend line at the RSI, we will see that the line hasn’t been tested yet, which means that we may expect Gazprom stocks to fall deeper. Earlier, the RSI indicated the start of growth. As we can see, after testing, the prices reversed and broke the sideways channel. That’s why conservative traders will probably wait for the descending correction to continue and consider opening long positions only close to the support area. If the price breaks 175, the decline will continue and the prices will return to the lows.
Mid-term analysis of Gazprom stocks
In the daily chart, there is a potential for Head & Shoulders reversal pattern. As we can see, there is the top of the pattern and its left shoulder. To complete the pattern, the price must rebound upwards and test the resistance level at 255. Only after that, we can expect the instrument to continue falling. In this case, the downside target may be at 165. A strong signal to confirm further descending correction is a breakout of the rising trend line at the RSI, which implies a decline lower than 175. However, thanks to significant growth earlier, this signal may not be enough for the market. To cancel it, the RSI indicator must break the trend line upwards and fix there.
However, this negative scenario may no longer be valid in the stock price skyrockets and breaks 280. In this case, the reversal pattern will be canceled and the instrument may continue growing above 320. That’s why in the short-term the price is also expected to fall and, as we can see, a conservative support area is close to 175-165. If bulls are able to hold this area, the stocks may continue its steady growth.
Of course, we shouldn’t exclude a possibility that the price may form just a Triangle instead of a reversal pattern. However, even in this case, it’s very important to see the price break the resistance level, which will confirm further growth.
In 2019, Gazprom stock prices showed a good upward dynamic, probably thanks to oil prices growth and the overall stability of the Russian Ruble, which was also rising. Right now, both of them, I mean oil and RUR, are falling, thus putting pressure on Gazprom stock prices and the Russian stock market. A warm winter and decreasing gas prices are doing their part. A positive factor that may temporarily support bulls is the growth of dividend payouts from the company.
From the technical point of view, the price is currently facing a strong resistance level. If bulls fail to hold the current levels and the price continues falling, the instrument may reach and test 175 in the nearest future. this area will look quite interesting for further growth. That’s why we may agree with Merrill Lynch forecasts and the conclusion that the current levels aren’t very promising for increasing long positions. It will probably be better to wait until the price completes the descending correction and only after that start looking for strong signals to buy the instrument.