What does the reduced supply of zinc mean to Noranda income fund when their contract runs out with Glencore? Very curious how this will all shake out in 2017.
Thanks for the assignment. This will be the fourth time since March of 2014 that I probe the particular patterns present on the charts for Noranda Income Fund (NIF.UN TSX). The last occasion was on November 26, 2014.Ken was evaluating an entry point and wanted a second opinion. The units were trading for $2.25 and the yield on distributions was 22.22% which had to be viewed as a very robust return. The research conducted at the time indicated that the MACD and the RSI were both turning higher and for those with an appetite for risk the fund was setting up a trade.
Upon re-examination that was the right call. NIF.UN caught a nice bounce off the 52-week low of $1.98 and started a new leg up. The issues with Glencore and the contact ending in 2017 are beyond the scope of how I might be able to assist you. I can identify the trend, support, and resistance related to the units but as Niels Bohr said many years ago ” Predictions are very difficult especially if they are about the future.”
Another inspection of the charts will provide an updated snap shot of the situation regarding NIF.UN.
The three-year chart depicts the breakdown that began in August of 2014 which was followed by a breach of support along the uptrend line and the 50-day moving average in September. In early October the trust broke below the 200-day moving average and then started to find resistance along both moving averages.
By early November the party was over as the units gapped down aggressively. In early December of 2014 the MACD and the RSI were turning higher indicating that the trust had become oversold and offered up the trade mentioned in the previous analysis. As NIF.UN approached $3.25 the momentum indicators signalled a sell taking it back to a retest of support along the 50-day moving average.
The six-month chart highlights the buy signal in December and the retest of support along the 50-day moving average. The yield of 17.67% on distributions is by any standard very generous and will attract those willing to take the risk to collect it even for a short period. At this point in time the patterns on the charts are neutral at best. There does appear to be support at $2.50 if the units should pullback further.
The average daily volume for the units over the last thirty days is 132,967. Over the last number of weeks volume has been generally below the average. The next flex point for the units will be the release of quarterly results in May.
Next time I will inspect Danier Leather Inc. (DL TSX) for Nate.
Make it a profitable day and happy capitalism!