The recent rig disaster in the gulf is causing a public relations and political nightmare for deepwater drillers.  As oil moved higher many major companies invested in deep water drilling projects like these in the Gulf.  Drilling in the Gulf of Mexico has always been controversial and this event will lead to more legislative restrictions on drilling.

This latest disaster will cause big oil to look for other development projects that is secure.  Oilsands Quest (BQI) is a perfect play on the impeding energy crisis caused by the rig disaster and also the trouble with Iran.  Major oil is looking for supply that is away from the middle east and legislative restrictions.

I believe Oilsands Quest (BQI) is being considered as a takeover candidate.  Selling off its non core assets and placing the experienced people in the right positions such as the recent COO shows to me that the company is serious about being acquired for a premium.

Look at this quote from the last press release describing the newly appointed COO.

“Ms. MacKenzie spent two years as Petro-Canada’s Vice-President of Human Resources, leading the human resources function across Petro-Canada’s four business units. She was one of the four-member senior Petro-Canada team that led the pre-merger planning for the integration of the Petro-Canada and Suncor operations.”

This is an important piece of information.

Look at the chart.

I believe BQI is ready to make a move above the 200 day moving average at traders look for alternative development oil companies.

The outgoing CEO is focused on exploration and development.  The new directors from Suncor, Petro Canada and Shell are old oil sand guys who understand how to bring these projects forward.  Plus it brings the experience to increase shareholder value through gaining joint venture partners or potential suitors.  Do not get caught up with emotion as the oil sand assets are there and the reaction to the news item will resolve itself after this initial sell off.  A future suitor for BQI does not want speculative oil shale on the books.  Right now BQI is on trend with other profitable oil sand operators such as Suncor and have assets which are on sale now at under a $1.

I believe with the new management they are making changes to make Oilsands Quest more efficient and effective.  They have a new director who is also currently a director of Suncor, a major oil sand producer and past chairman of Petro Canada.  He has the experience of merging companies, making deals and increasing shareholder value.  This new appointment obviously influenced the decision-making this past week.  I would not be surprised if he considers taking over the new CEO position.

I believe in oil sands and the long term bullish price of oil.  I would like to wait and give another few days to shakeout weak holders.  This is a long term bottom for BQI and if there is not a significant rally in the next couple of days I would be surprised.

I believe the latest move will be short lived and the new management will work on building resources through the reservoir testing, in situ mining development, and possible joint venture or takeover deals.  Let us watch and I believe that we will see a reversal shortly.

Oilsands Quest had a major breakout since our original recommendation.  Since the market has pulled back, BQI experienced a return move back to the trend.  After major high volume breakout pullbacks or return moves are common.  Usually when support is shown at the 50 day investors start piling in leading to a major move.

The major news these past couple of weeks has been the dovish beliefs of most central banks.  High unemployment, sluggish economy coupled with a currency devaluation, inflation is our economic reality at the moment.  Gold is extremely strong yet overbought, major market indexes are breaking into new highs on low volume so I am reviewing carefully my favorite opportunities.

Looking at the chart of BQI Oilsands Quest I believe it is presenting a secondary buy point after an initial breakout.  It happens quite often that breakout stocks offer second chances.  This is where the real market investors add to positions.  I am looking for a reversal and support to show up after its first pullback to the 50 day moving average.  Today’s close at the low is concerning.

DNN Denison broke through the 200 day moving average which was its support but closed near a previous low.

This is the point where our stocks need to make a stand.

The best value at the moment and the nicest looking chart is Oilsands Quest (BQI), which is the largest holder of contiguous oil sands in Saskatchewan the province which borders Alberta.  They have a huge land position and as the price of oil increases and the economy continues to grow especially in Asia I would not be surprised if they get an offer either from overseas or by one of the larger oilsands operators like Suncor.  In order for oilsands to be profitable oil has to stay over $75 a barrel.  

Oilsands Quest is trading below book value and right now can be a quite profitable investment as their land position contains over 2 billion barrels of discovered resources. 

Take a look at this map of their land position.

I believe oil will continue higher as the economy is stabilizing, the dollar is falling and emerging markets are growing.  The chart is also showing a major base and breakout where BQI sold over 15 million shares a week ago.

The floor has been established and the 15 million share breakout of the rectangle pattern was a huge development as major institutions are adding at this price level.  Moving averages have crossed and are pointing higher.  The odds make me prepared for a major move higher.

Disclosure: I own shares of BQI.