Canadian Oil Sands Ltd. sliding with oil prices

Jun 1st, 2012 – Comment

If you must chase the yield the best strategy would be to chip away at the stock and accumulate starting at $19.00 and see if it holds.


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Hi Lou,

What are your thoughts on COS? The dividend is attractive at almost 7% yield. Do you see this as a good time to move into COS?

Thanks.
Ian

 

 

 

 

Hey Ian,

This will be the third time that I have examined the case for Canadian Oil Sands Ltd. (COS TSX). The first time I ran the charts was on a request from Irene on June 16, 2010. The shares were trading for $28.72 and it was advised to watch support at $26.00 because if that level was breached they would test support at $22.50. Retrospectively that is what transpired.

The second time I analyzed COS was on March 16, 2012 when the shares were trading at $21.63. At the time Mark wanted to know if he should add to his position. It was observed the stock was trending to a retest of $19.00 and he should buy on a pullback.

Another review of the situation will help you decide if now is a good entry point. Clearly a 7% dividend yield is hard to ignored.

 

The three- year chart for crude oil needs to be consulted when it comes to the shares of COS. As crude oil goes so goes the stock. Oil prices are in a free fall and until they turn the pressure on COS will continue.

 

 

 

 

 

 

The three-year chart for COS indicates that the shares have been in a sell off since April of 2011 and that every attempt to move higher has met with resistance along the 200 and 50-day moving averages.

Currently the shares are holding support at $20.00 but as mentioned in the March 16, 2012 post it looks like the best case scenario will be a retest of support at $19.00. If $19.00 doesn’t hold then there is a thin ledge of support that comes in at $16.00 and below that nothing until $10.00.

 

 

The six-month chart illustrates the resistance at $23.00 that the stock met in the beginning of May and the downtrend that dominates the agenda.

The RSI and MACD are both indicating that a reversal of the downtrend has yet to emerge.

At this point we still need to show caution in the face of the downtrend. There is no sense to chase a 7% yield and sacrifice capital in the bargain. If you must chase the yield the best strategy would be to chip away at the stock and accumulate starting at $19.00 and see if it holds.

Make it a profitable day and happy capitalism!

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