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Sunday, January 8, 2012


SU is setting up for a move higher. The mover should be toward 36-37, but the easier trade is to 33-34.  Technically, the daily setup suggests the 200SMA will break, giving SU a bullish thesis.

The fundamentals confirm the positive bias.

1. There is a projected 12% increase in production from 2011.  2012 is projected to see 7.5M production number, from 6.7M in 2011.

2. SU needs crude to stay above 80 to be viable, but based on their 2012 revenue projections they need WTI and Brent to stay above 89 to meet revenue expectations. Right now, WTIC and Brent are well above 89.

Both look pretty solid here, and do not look to want to test 89.  Over the next few weeks the down side for Brent and WTIC potential downside may be the high 90s and mid 90s, respectively. Enough to surpass expectations.

The negatives do not seem to be that bad, when compared to the above.

1. NatGas AECO price is currently 2.73, already below their expectations  of 4.74.

2. In 20011 oil prices were higher, thanks to geopolitical factors, and the year-over-year comparisons may not look so good, which merits a reduced multiple.

Barring a complete breakdown of Crude, SU will retest the upper band of resistance on the daily or approach the weekly 150SMA. Sustained oil prices should allow SU to trade north of 34-35.

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