Argent Energy Trust Offers a 19.70% yield and all the risk that goes with it

Mar 21st, 2014 – Comment

Hi Lou, Please share you thoughts on Argent Energy Trust. Regards, George   Hey George,   Thanks for the assignment. This will be the second time that I sift through the details regarding Argent Energy Trust (AET.UN TSX). The last time was on February 12, 2014 on a request from Dan when the units were […]


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Hi Lou,

Please share you thoughts on Argent Energy Trust.

Regards,

George

 

Hey George,

 

Thanks for the assignment. This will be the second time that I sift through the details regarding Argent Energy Trust (AET.UN TSX). The last time was on February 12, 2014 on a request from Dan when the units were trading for $7.20 and the yield on distributions was 14.56%. It seemed that he was bottom fishing and wanted to know if it was a good time to buy. The analysis conducted on his behalf indicated that the units were labouring under a downtrend line with the added negative of a death cross. It was advised that the best way to proceed was to put AET.UN on his watch list and monitor its progress. The risk when bottom fishing is that you can anticipate the bottom instead of confirming it.

Retrospectively that was the right call. Soon after posting my thoughts a series of downgrades hit the wires that took the units to new lows. Another examination of the charts will form the basis of my opinion on how best to proceed.

 

AET.UN

The three-year chart aint no oil painting as we used to say out west. The current yield on distributions is 19.7% which like the sirens call can send you crashing on the rocks! You must have quite the appetite for risk to consider these units. The patterns that you need to be aware of include the established downtrend line, the death cross, the failure to hold support at $10.00 in November and $7.00 in February. There is also the resistance along the 50-day moving average that proved the ruin of the poor boy.

 

 

 

 

 

 

 

AET.UN2

The MACD and the RSI on the six-month chart look like they are about to signal a buy from an oversold position. Undoubtedly buyers have been attracted to the yield and have moved the units off the lows. The next flex point will come with the announcement of Q1 results on May 13, 2014.

The biggest question hanging over these units is the sanctity of the dividend. Having said that if you have a robust appetite for risk and want to feast on the generous distribution then you can pick away at this one ahead of the flex point. If you are risk averse this is not the time to change your investor profile.

 

Make it a profitable day and happy capitalism!

 

 

 

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