Twin Butte Energy struggling with selling pressure

Jul 31st, 2013 – Comment

The dividend yield of 11.82% is like the Sirens of Titan beware its call.


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TBE LOGO

Hi Lou

Would you please give your comments on Twin Butte Energy. It had a couple of strong sell offs.
Thanks,

John

 

Hey John,

Thanks for the assignment. This will be the second time that I investigate the opportunities and risks associated with Twin Butte Energy Ltd. (TBE TSX). The first study was conducted on August 22, 2012 when the shares were trading for $2.61. Peter wanted to know my thoughts on the company and the research conducted on his behalf uncovered the trading pattern that dominated the chart.

The shares were trading in a rangebound pattern with resistance at $2.70 and support at $2.40. It was advised to expect a pullback and a retest of support but not a breach. Retrospectively that was the right call. The stock retreated to support and then caught a bounce to a 52-week high of $3.02 on October 17, 2012. But that was all TBE had to give. By November of 2012 the shares began a sustained retreat into the second half of 2013.

Another examination of the charts will inform my comments on how best to proceed.

 

 

TBE

The three-year chart indicates that a downtrend has been in place since early November of 2012 generating a series of lower highs and lower lows along the way. The shares breached support at $2.40 in February of 2013 and is now meeting resistance at that price. The gap down in mid July of 2013 was triggered by reduced production guidance followed by a series of cuts to target prices by analysts that follow the stock. Those news releases gave rise to panic selling that made it almost impossible to avoid getting swept out to a sea of losses.

 

 

 

 

TBE2

The six-month chart isn’t offering a lot of signals that buyers are ready to retake control of the market. The MACD and the RSI are indicating that investors should expect continued selling. Notice the resistance along the 200-day moving average that the stock has not been able to overcome. At this time the best course is to stay on the sidelines until there is some evidence that the selling pressure has exhausted itself.  The dividend yield of 11.82% is like the Sirens of Titan beware its call.

 

Make it a profitable day and happy capitalism.

Categories: Energy
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