Afren

After all that recital and to close the circle, I have finished my business here. It doesn't look like it will break out of the 90's currently and with news due anytime this month that could send it materially up or down, I will sleep very soundly with no position.

GL
F4T

Well, a return to the recent low today so the jury is out on this though I am still interested in this currently. I am not in any way suggesting people buy this as it is clearly high risk, but i will give my thoughts, much of which are fundamental as this is unavoidable with this stock currently.

Technically, the 90/91 low has so far held again today which is positive as the lows are still being bought up, though the fall from Fridays close gives some concern given my earlier technical comments. I expected a 50% retrace to 94.50 this morning then a rise but we got 100%.

IMO 94 and 97.50 are key initial resistances in any rise. I believe that 73 is a firm support below.

uk.advfn.com/p.php?pid=chartscreenshotsh...G0%3D&symbol=A%5EAPT

We do have positive divergence on MACD and RSI on the hourly, which I like. Also on the daily but this is distorted by the initial fall from 140's.

On the fundamental side, there is IMO a lot of fear and misunderstanding of the issues by some in the market, perhaps by those who are not learned in either the E&P international scene or company/corporate finance.

I see it this way. The directors took kickbacks on the permission payments to a third party, who I understand is their partner in Nigeria. Clearly this indicates that the company payments were in excess of what they would have been with an arms length deal. For this reason I believe that the asset values in the books is erroneous though I am not up to date on the IAS rules on this currently. There could well be a writedown if the funds are not recovered and maybe even if (some) are. I would imaging that the auditors would push for this since some of the sums are / will be known. This would be viewed very badly by the market.

Whatever the directors took, double that as the other side's management would have had their cut also. In a lot of countries/cultures this activity is normal, even expected. Not right, but more common than you might think. It is not so common for UK directors to do it, but often a necessity to pay "middle men" to get a deal done. I expect that the kickbacks would have been minor compared to the total payment in the financials but certainly significant and material to a layman. Alot of people appear to have had their names on the list, which is concerning.

The issue for the company is threefold
a) disclosure of related party transactions (a company can pay what it likes for permissions/assets, the directors having that power assigned to them by shareholders. It is called management's judgement.) and
b) There are also now strong regulations regarding corruption within western companies. These are regulated in the company's listing and their financial reporting. I think it is more the latter that will upset the market/City.
c) The directors misleading the shareholders in the course of their fiduciary duty.

So, for an investor, what are the problems/negatives with buying this stock?

1. The unknown / Being in the dark over the finer detail. Lot's of comments, but who is right and who is off the mark? How many skeletons and how nasty are they?
2. Institutions (some/all?) may be forced to sell under their own internal guidelines re: corruption etc. This put's downward pressure on the stock. In any case, they could not buy more until the issue is resolved.
3. Are the remaining management competent? Can the business' reputation be saved or must it be sold?.

This type of scandal casts a(nother!) shadow over the smallcap and midcap E&P sector as it puts doubt in an investors mind. Something else to bear in mind is that when a company is under such a cloud it cannot be valued on it's assets anymore or not until the shadow is totally removed, so forget that as an upside target.

I met the suspended CEO a few years ago. Very laid back and smooth talking.

All IMO and conjecture.
F4T

There, you see I do follow fundamentals Learner!

Chart looks very good to me today going into the close. Recent low held firm, nice volume / hammer / double bottom possibility. Some issues but technically interesting. A 50% retrace of fall takes you nicely to the ma20 but one would need to have entered at the lows to counter the inherent risk IMO.

Will be interesting how this plays out.

F4T

Thanks F4T,

I'm out, not planning to get back in Afren anytime soon.
Wish I'd jumped back in GKP though, just been observing, great TA by you there mate.

Count,

3 gaps up followed by dark cloud cover, so expected retrace in motion. 50% retracement is ~101 61.8% at 98.50. First suppor below 95.40

BUT I believe that results/news is due soon here and I never trade the unknown in such circumstances.

Nice trade count. I like it. Make a plan and stick to it.

We might get a three gaps up formation tomorrow, which would be bearish.