I enjoy reading your comments. I’m looking to add TransCanada to my portfolio as a core holding and wondered if now might be a good time. Would you please do your magic with the charts.
Glad to hear that you are getting value from the analysis. Keep in mind that there is no magic to my application of technical analysis pattern recognition methodology. I encourage all investors to at least become aware of technical tools to reduce risk and identify opportunities.
This will be the second time that I examine the case for TransCanada Corporation (TRP TSX). The first examination was conducted on May 26, 2009. The shares were trading for $32.00 and Nizar wanted to know what was holding the shares down. The research conducted on his behalf identified that as the first round of stimulus spending were making their way through the economy investors were chasing stocks with a higher beta and would turn their interest to dividend paying stocks over time. Four years ago the shares of TRP were offering a 4.8% dividend yield and it was advised that it was an attractive rent to collect while waiting for buying to drive the price higher. Retrospectively that was the right call for conservative investors.
Another run at the charts will inform my opinion on the risks and opportunities associated with TRP.
The three-year chart depicts a stock that has enjoyed a profitable advance that gained momentum in February of 2011 when the shares broke above $34.00 which had been providing resistance through late 2010. The move took TRP to its 52 week high of $51.21 on May 22, 2013. A $17.21 capital gain plus the dividend made for a great return for investors who caught the ride. However as one might expect trees don’t grow to the sky and stocks don’t only go up.
TRP has broken the uptrend that had been so generous and is currently attempting to hold support close to $44.00. The current dividend yield is 4.056% so the question is how best to proceed.
The six-month chart indicates that the MACD and the RSI have generated buy and sell signals through the recent pullback. The sell signal in May would have helped investors preserve capital, while the buy in June would have generated trading profits. Currently the momentum indicators are suggesting that there is more selling to endure.
I would suggest keeping your powder dry and look for better evidence that TRP is about to sustain another advance.
Make it a profitable day and happy capitalism!