Tuesday, February 1, 2011

TransGlobe Energy Corporation (NASDAQ: TGA; TSE: TGL) Q1 2011 Analysis

Recent price: 12.15$
P/E Ratio: 25.49
3 month Target Price: 16$

Company Description
TransGlobe is an independent, Canadian-based international upstream oil and gas company with exploration and development activities focused on Egypt and Yemen. As of May 2009, all of TransGlobe’s production consisted of crude oil, which is marketed with pricing benchmarked to the North Sea Brent price. The Company is listed on the Toronto Stock Exchange under the trading symbol TGL and the NASDAQ under TGA.

Confidence Margins
Strong resistance $20.26 (+67%)
Light resistance $16.45 (+35%)
Light support $9.75 (-20%)
Strong support $7.70 (-37%)

TransGlobe Energy is one of those few companies that can be considered a play on th recent developments of geopolitical instability in Egypt. The company's projects that are in the most advance state are based in Egypt, it is then easy to understand why the company suffered a huge drop in it's stock price after these events. These events in Egypt should be seen as a short term opportunity to acquire shares of this company as a return to more stable condition will bring the stock price closer to recent values.

Entry strategy
For the cautious investor:
Buy the stock for 12.50$ or less.

For the risk-taking trader:
The June 2011 12.50$ call option contract seems to be the right position to take, they can be acquired for 175$ per contract.

Exit Strategy
For the cautious investor:
Sell when the stock reaches 16$, or keep it until 20$ if the stock crosses the light resistance level.

For the risk-taking trader:
The contracts should be kept until the underlying reaches around 16$, as for the cautious investor.

Disclosure: The author is long TGA

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