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STO has climbed over 5% in the last couple of weeks. Despite this gain, the stock is actually still down for the calendar year after having been stuck under a downtrend resistance line which capped any attempts higher. JP Morgan upgraded the stock to Overweight (from Neutral) today, mainly as a result of recent underperformance relative to its peers Woodside Petroleum and Oil Search. The broker has a $14.40 price target on the stock.
To put it in perspective, WPL is around 5% firmer this year while OSH is 9.7% higher year-to-date. A significant risk has been removed now with PNG LNG sales set to commence around mid-2014. With monetisation of the project on the way and more clarity on purchasing third party gas, the broker felt it imperative to upgrade the stock.
From a price action perspective, there has been a downtrend resistance in place since STO topped out at $15.80 in September last year. This downtrend was just broken over the past week and STO could now be poised for a near-term recovery. The move was triggered by a runaway gap on May 2 and the stock has just popped back up above $14 and could be in for a run to $14.50 in the near-term, where short-term resistance lies. A close back below the downtrend resistance would be a negative sign for the price action.