TransAlta Corp a buy on a pullback

Jan 6th, 2012 – Comment

On a pull back I would look for support at $20.50 and below that at $20.00.


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Would you please offer your opinion on the future of Trans Alta ( TA- tsx). The stock seems to be lagging lately due probably to the fire etc. experience in the recent past.

Thank you in advance

Jim
Belleville, Ontario

 

Hey Jim,

Thanks for the assignment. You are correct that there have been disruptions to the business operations at some of TransAlta Corp.’s ( TA TSX) facilities. Most recently there has been an  extended outage at Genesee 3. The company has reported that they expect a hit to Q4 net income. The street anticipates the release of Q4 on or about February 24, 2012.

Let’s examine the charts for guidance as to what we might expect from TA.

 

The three year chart tells the tale of a stock that has been in a gentle up channel since mid 2010 but has recently broken below support on the lower rail. There is also a death cross forming which adds caution to the prospects for the shares.

 

 

The six month chart depicts the gap down in mid October, 2011 as the result of a bulk trade at $22.00. The trade took the legs out from under the advance that started after the August panic selling that hit all stocks.

Since the October high of $23.43 resistance has formed along the downtrend line. In addition the MACD and RSI look to be turning down. On a pull back I would look for support at $20.50 and below that at $20.00.

TA is a solid company with tangible assets and an attractive dividend. Management has positioned the organization for further growth and is looking to new technologies to meet the challenges associated with burning coal and natural gas to generate electricity. Currently over 75% of the company’s power capacity comes from plants utilizing those two fuels.

If you own the stock continue to hold it and reap the 5.5% dividend yield. If you are looking to buy the stock, do so on a pullback.

Make it a profitable day and happy capitalism!

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