Nice fundamentals too bad about the chart

Feb 3rd, 2010 – Comment

If you are going to get involved with HSE make sure to trade it in the channel and watch for breaks below support and breaks above resistance. Right now it looks like the stock is poised to bounce off its lower support so it could be a good entry point for a channel trade.


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Lou Schizas is an equities analyst, investor, entrepreneur, professor and television and radio personality – and a true believer in the happiness-inspiring powers of capitalism.


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husky

 

Hi Lou,
I’m a student of yours at Sheridan College. Thank you for taking the time to teach us. My question to you is in regards to Husky Energy. Like most large energy companies Husky’s stock bottomed in March 09 and shot up there after. But that’s where the similarities stop. Unlike CNQ and Suncor, Husky has been in an overall downward trend since June, albeit a highly fluctuating one. Husky pays a nice dividend currently yielding %4.2 while Suncor’s and CNQ’s dividend yields %1.1 and %0.6 respectively. P/E ratios don’t look out of line for Husky. Is Husky a bargain today?
Thank you,
Will

 

Hi Will,

 

Continue to make the most of your education!  Husky Energy Inc. ( HSE TSX) provides a perfect example of a company that appears to offer a lot of fundamental information that might suggest a good investment opportunity but the chart is providing a vastly different story.

HSE

The three year chart provides a view of a stock that has been stuck in down channel for over seven months, which can seem like a lifetime when your money is on the line. If you were to draw a straight line from the $35 peak in June to the low of $30.33 in January of 2010 you will have set the line of resistance on the channel. If you draw a straight line from $30 in July of 2009 to $27 in January of 2010 you will have set the line of support for the down channel.

You will notice that HSE has been trading in the channel and losing value along the way. Despite a better than average dividend this stock has not been creating wealth for its shareholders.

 

HSE2

The six month chart provides a view of the more recent trading in the stock. The stock had a nice advance from early December of 2009 when the MACD generated a buy signal but as it approached $30 it met resistance along its 200 day moving average. The MACD also generated a sell signal.

Currently HSE is testing support along its lower support from its down channel, the MACD seems to be turning up and the RSI indicates that the stock is oversold.

On the operations side of the business I think that HSE needs to get a boost in its production in 2010 to convince investors that they have some new opportunities that they can develop. HSE is drilling prospects offshore China and advancing their oil sand leases but until these prospects start producing hydrocarbons the company will not capture the interest of investors.

If you are going to get involved with HSE make sure to trade it in the channel and watch for breaks below support and breaks above resistance. Right now it looks like the stock is poised to bounce off its lower support so it could be a good entry point for a trade.

Happy Capitalism!

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