On a technical basis, both the MACD and Slow Stochastics indicators are at crucial points and need confirmation one way or the other – that is, price action over the next few days will likely determine whether Suncor will remain in its current downtrend or break through on the upside.
On a fundamental basis, Suncor is a blue chip, go-to oil sands play that is currently trading very cheaply. At its current price of $21.31, not only is the market not giving the company credit for its 350 mbbls/d of production, which roughly equates to $47.85/sh based on US$70/bbl WTI according to Dundee Securities analyst Menno Hulshof but it is also discounting future production growth from Voyageur, where Suncor is planning the construction of a third oil sands upgrader, west of it’s existing facilities, targeted for completion in 2012 and designed to increase the company’s oil sands production capacity to 550,000 barrels per day. In the near term, the company is expecting a 35% increase in upgrading capacity by year end 2009 and production at Firebag is expected to increase to a peak rate of 90mbbls/d by late 2009.
Strategy: Keep one eye on Suncor’s price action while keeping the other eye on the price of WTI Crude. A bottoming in the price of WTI Crude is likely a bottom for Suncor. Look for a sustained rally over a few days or even weeks in the price of WTI Crude for a confirmation of positive price action as recent bouts of strength were merely opportunities for traders to sell into.
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