Tullow Oil is in a downtrend toward its lowest levels.

The company’s fundamentals are not encouraging; Sales show no sign of progression and margins evolves erratically as net margin came to 6.4% last year from 26.6% in 2013. Moreover, the financial situation is deteriorating. The debt is increasing, while EBITDA is not following, leading to an expected leverage of 1.62 at the end of 2014. Furthermore, P/E ratio of 30.1x estimated earnings and EV/Revenue ratio of 6.14x reflect an overvalued company. Finally, revenues and EPS for the next two years have been largely revised downward proving indicating the bearish trend of the business activity.

From a technical viewpoint, the security is in a bearish trend in the long and mid-term, but prices have increased in the short term. The current technical rebound allows the stock to be close to its GBp 850 resistance. Despite the breakout of 100-day moving average, prices should decrease towards new lowest levels.

Investors can take a short position in Tullow Oil at the current price. The target will be GBp 777. A stop loss will be placed over GBp 863 area, protecting from a renewed bullish movement.