Good morning Lou,
Back in May you wrote about NIF. UN. Recently it has crashed. Is this a good entry point?
Ken from Calgary
Snow-birding in Mesa
Congratulations on winning over winter!!! This will be the third time that I inspect the case for Noranda Income Fund (NIF.UN TSX). The last time was, as you mentioned, May 21, 2014 on a request from David. The research conducted on his behalf identified that the units were retreating from a 52-week high near $5.79 and had breached the 50-day moving average but not the uptrend line. The MACD and the RSI were not signalling a trend reversal and the units needed to hold support at $5.20 or they were likely to retest support along the 200-day moving average in the $5.08 range. It was further advised to trade the units within the established up channel.
Another examination of the charts will help determine if now would be a good time to jump in.
The three-year chart depicts the retest of the 200-day moving average in May of 2014. The units then regained support both along the 50-day moving average and the uptrend line. In August NIF.UN started to move lower breaching the uptrend line and by September it was meeting resistance along the 50-day moving average. By October the units had broken below the 200-day moving average which also started to provide resistance.
In November the release of Q3 results sent the shares cascading lower. The announcement contained management’s discussion of the possible outcomes arising from the end of the supply and processing agreement with Glencore in 2017. Its never very comforting for unit holders to confront the possibility that operations that sustain cash distributions could be discontinued.
The six-month chart tells the tale that it is always best to panic first. The units fell in stages but not many. The triumphant were those that hit the sell button early and preserved their capital. At this point in time NIF.UN has been oversold for most of the last two weeks. The MACD and the RSI are both turning higher as investors have begun bottom fishing the units. Management has not reduced the payout to investors and perhaps the allure of a 22.22% yield on distributed cash is too powerful to resist.
If you have an appetite for risk it looks like NIF.UN is setting up a trade.
Make it a profitable day and happy capitalism!