Tracking a Bullish Elliott Wave Setup in Pason Systems

Bullish   

Headquartered in Calgary, Canada, Pason Systems Inc. describes itself as “a leading global provider of specialized data management systems for drilling rigs.” The company’s hardware, software and services enable the collaboration between the rig and the office for the oil and gas drilling industry.

Despite all efforts to decarbonize, the world continues to consume roughly 100 million barrels of oil per day. This means that there will be no shortage of business for Pason Systems anytime soon. On the other hand, the oil and gas industry is notoriously cyclical. Demand for the company’s products and services goes up and down with the price of the commodities it helps to pump out of the ground.

So, understandably, ever since the price of crude oil peaked near $130 a barrel in 2022, Pason stock has been a rather disappointing investment. Can we expect this to change soon? The Elliott Wave chart below gives reasons for optimism.

Pason Systems stock Elliott Wave analysis

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It shows that the recovery from under CA$5 in 2020 to CA$18.60 in 2024 took the shape of a five-wave impulse. This pattern tells us that Pason stock is in an uptrend, which can be expected to resume once the current correction is over. We’ve labeled the pattern (1)-(2)-(3)-(4)-(5), where the fifth wave was an ending diagonal. Wave (4) looks much bigger than wave (2), but it didn’t touch the top of wave (1), which would’ve been a violation of the Elliott Wave rules.

If this analysis is correct, wave (c) of the corrective phase of the cycle can drag the stock price to the support of wave (4) near CA$10 a share. That would be a good time for investors looking for exposure to the oil and gas industry to add Pason Systems. From then on, the stock could reasonably double and even triple in the years ahead. In the meantime, debt shouldn’t be a concern given the company’s healthy net cash position.

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