Pengrowth Energy Corp. continues to punish investors

Nov 9th, 2012 – Comment

At this point the momentum indicators are not suggesting that the selling has abated and the best approach to the stock would be to wait for a trend reversal.


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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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Hey Lou,

Always enjoy your witty commentary with John Oakley on Talk Radio AM640.

Was wondering if I could get your opinion on Pengrowth Energy (PGF), this dividend paying stock has been hammered a lot this year due to low natural gas prices and the dividend cut in the summer.

Do you think it’s hit the bottom and poise for a rebound or is it likely to languish for a while still?

I’m thinking it may be a good entry point, natural gas prices have stabilized from the lows and they have had some recent positive news with quarterly production.

Hope to hear your input.

John

 

Hey John,

Thanks for the assignment. I last conducted an analysis on Pengrowth Energy Corp.(PGF TSX) on June 16, 2012 when the shares were trading for $7.55. Dean wanted to know if the dividend was safe and if the stock could make its way back to the $11.00 range. It was observed that the shares had caught a bounce off of support at $7.00 from a very oversold position and that there was resistance at $8.00 and then again at $8.50. In addition it was noted that the retreat that started in March of 2011 had established a downtrend line that was holding firm and that the death cross that surfaced in June of the same year didn’t offer much in the way of support for a trend reversal. Finally every effort to move higher in 2012 has met resistance along the 50-day moving average.

It was advised that it would be prudent to wait for better signals of a reversal of the downtrend and that  a return to the $11.00 was not in the immediate future.  As to the sanctity of the dividend it was suggested that a yield of 11% although attractive presented the risk of a cut. Unfortunately the analysis was correct. The dividend was sacrificed in July of 2012 and the stock has continued to punish investors.

Another run of the charts will provide greater insight into the prospects for an investment in PGF.

 

 

The three- year chart provides a textbook example of why capital preservation is so central to the decision making process. There were so many opportunities to get off of this ride to hell which has cost investors 60% of their capital from the $14.00 high. The series of lower highs and lower lows in concert with the established downtrend and the death cross are what keep investors up at night! Also worth thinking about is the need to confirm the bottom as opposed to anticipating it. This meat grinder has chewed through every level of support going back to 1993 and may have to retest the January 1992 low of $4.50.

 

 

 

 

 

 

The six-month chart indicates that the MACD and RSI provided investors with a buy signal in late June and a sell signal in mid August that would have provided some trading profits for those that wanted to feed off this wounded beast. At this point the momentum indicators are not suggesting that the selling has abated and the best approach to the stock would be to wait for a trend reversal. There is no sense finding new lows with your hard earned capital!

Make it a profitable day and happy capitalism!

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