Well License Moving Averages: How To Use Them
Some of the primary functions of a moving average are to identify trends and reversals, measure the strength of an asset's momentum and determine potential areas where an asset will find support or resistance.
Trend
Identifying trends is one of the key functions of moving averages, which are used by Oil & Gas Service companies business owners who seek to "make the trend their friend". Moving averages are lagging indicators, but in the case of Oil & Gas Producers new well license can be a leading indicator to new drilling, pipeline and facility activity. Grouping Producers together and monitoring well license activity together can provide an indicator of your sales & revenue activity. This model need to be combined with a knowledge of your market of the customer spend and how many well license convert to spud wells.
Time Periods & Comparison
Time periods used in creating the average, as each time period can provide valuable insight into different types of momentum. In general, short-term momentum can be gauged by looking at moving averages that focus on time periods of 20 days or less. Looking at moving averages that are created with a period of 20 to 100 days is generally regarded as a good measure of medium-term momentum. Finally, any moving average that uses 100 days or more in the calculation can be used as a measure of long-term momentum. Common sense should tell you that a 15-day moving average is a more appropriate measure of short-term momentum than a 200-day moving average.
One of the best methods to determine the strength and direction of an asset's momentum is to Compare moving averages onto a chart and then pay close attention to how they stack up in relation to one another. The three moving averages that are generally used have varying time frames in an attempt to represent short-term, medium-term and long-term price movements.
Conclusion
Oil & Gas service companies have a wealth of information they can use to predict how active Producer customers will be is a specific market these predictions will help companies manage the ups & downs in the oil & gad industry.