Husky Energy Inc. a trade not a hold

Feb 8th, 2012 – Comment

From the information available at this time it would be best to wait for the release of Q4 results to ascertain if HSE has the strength to break above resistance.


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Lou,
First let me say thanks for your articles on globeinvestor.com.

Why doesn’t the market like Husky?

It is not expensive, with a PE of 10.7
a yield of 4.8, good balance sheet, and
yet its 50 day moving average looks
like it wants to cross over its 100
day moving average.

Thanking you in advance for your comment.

Joe

 

Hey Joe,

Thanks for the assignment. I last undertook an analysis of Husky Energy Inc. (HSE TSX) for Will, on February 3, 2010. At the time the shares were trading for $27.13 and were oscillating in a down channel. You ask why the street doesn’t like the stock and the simple answer is that the company has failed to grow sufficiently to meet expectations. It is not the case that they have failed to grow but that they have failed to meet expectations.

My old pal Peter Jahn taught me many years ago that managing investor expectations is the toughest job in the world. The energy sector is very much a what have you done for me lately type of environment. If you are not bringing the roses in terms of new production, the discovery of new fields, and increased earnings, you had better get used to being ignored.

A review of the charts will provide additional information to help you decide how best to proceed with HSE. Keep in mind that the company is scheduled to report its Q4 results on February 9, 2012, which will provide additional information as to how they are progressing.

 

 

 

 

 

 

The three-year chart tells the tale of a stock you want to trade not hold. There have been many opportunities to buy and sell on pops and drops but holding the shares would have resulted in a loss of capital. Also worth noting is the resistance that forms at $27.00 and again at $29.00.

 

 

 

 

 

 

The MACD on the six month chart has generated healthy buy and sell signals over the period. Make note of the resistance along the 200-day moving average. Every attempt to move through the barrier has so far failed. From the information available at this time it would be best to wait for the release of Q4 results to ascertain if HSE has the strength to break above resistance. If it does then there would be a potentially short but profitable trade to follow.

 

Make it a profitable day and happy capitalism!

Categories: Energy
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