Atlantic Power Corporation has punished investors

Dec 21st, 2012 – 2 Comments

The move up from the 52-week low seems to be in response to a severely oversold position as opposed to real enthusiasm for the growth prospects for the company.


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In your  October post  you indicated that ATP was a sell before the Q3 release. A very good call as it dropped 25% or $3 immediately.

I would be very interested in your updated analysis now at the new price in the $11 range.

Thank you

Ian

 

Hey Ian,

Thanks for the assignment. My last investigation of Atlantic Power Corporation (ATP TSX) was on October 12, 2012 when the shares were trading for $14.57. Luc owned the shares and was concerned about how they might perform. The analysis conducted on his behalf revealed that the shares were range bound with support at $13.50 and resistance at $15.00. The RSI and MACD were both pointing towards more selling pressure developing and it was advised to take some profit and look to buy back in at the lower end of the range. It was also mentioned that the company would be reporting its Q3 results November 5, 2012 and that he needed to put that into his decision making matrix.

I often refer to a quarterly report as a flex point because it is a significant event that serves as a pivot point. Better than expected news will drive the stock higher while disappointing results will erode shareholder value. Delivering what was expected will see the shares trade sideways. There are four reporting periods each year and it would serve all investors to know when the companies that they own will be reporting. As luck would have it Globe Investor provides a table that I use regularly to see what has and is expected to transpire when it comes to reporting results.  Here is the link to the tab and the information for ATP

http://www.theglobeandmail.com/globe-investor/markets/stocks/analysts/?q=ATP-T

Another run at the charts will provide further depth to the analysis at this junction.

 

The three- year chart tells one ugly tale of woe. The sudden and aggressive selling would have provided few opportunities to find shelter on the release of Q3 on November 05, 2012. The stock closed at $14.79 on the 5th then dropped to $13.15 at the close on November 6, 2012. However there was time to get out of Dodge before the 52 week low of $10.57 on December 13. Investors have to be able to respond to changes in trend if they want to preserve capital in the face of aggressive selling. Cut your losses and run your profits is standard operating procedure in my household.

 

 

 

 

 

The six-month chart illustrates the resistance that came in at $15.00 and the subtle sell signals generated by the MACD and RSI ahead of November 5, 2012. Currently the stock has caught a bounce off the 52-week low as investors are no doubt attracted to the 10.88% dividend yield. What you have to keep in mind with this stock is the sanctity of the dividend. If the dividend is cut or eliminated there will be more pain and suffering for investors.

 

I would be very careful in approaching this stock. There is a huge gap down that will take lots of work to fill, and a death cross that surfaced in late November.  The move up from the 52-week low seems to be in response to a severely oversold position as opposed to real enthusiasm for the growth prospects for the company. I don’t see ATP as a buy.

Make it a profitable day and happy capitalism!

 

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