Good Day Lou Schizas,
Would like to have your take on Toronto Stock Exchange: TDG ?
Andy in Montreal
Thanks for the assignment. Trinidad Drilling Ltd. (TDG TSX) has been expanding its fleet of drilling rigs since 2003. They started with 20 rigs and after a recently announced merger with CanElson Drilling Inc. (CDI TSX) the rig count of the combined companies will total 163. The fleet offers advanced features designed to meet the needs of its clients in Canada, the United States,Mexico, and Saudi Arabia. The deal was driven by the need to reduce costs and firm up the balance sheet at TDG.
The company has been savaged with the oil field services sector which has had to manage the collapse of hydrocarbon prices that started in the summer of 2014.
An inspection of the charts will form the basis of my take on the stock.
The three-year chart provides a text book illustration of a steep decline that gathered momentum very quickly. That is not to say that there weren’t many opportunities to hit the silk and preserve capital. The first signs of distress surfaced in June of 2014 as the stock hit a 52-week high of $12.50 and the MACD and the RSI turned lower. The was also the appearance of a double top in the same time frame which should have added to investor concerns. A double top indicates that a trend reversal may be forthcoming and that those with holdings in a stock should be prepared to take defensive action.
By early July of 2014 the stock broke below the 50-day moving average which was followed by a breach of support along the 200-day moving average by the end of the month. In early October a bearish crossover formed as the stock failed to hold onto support at $9.50. Investors who failed to get off the ride endured a fall to the 52-week low of $3.82 by March of 2015.
The six-month price provides a closer look at the move off the 52-week low in March with concurrent buy signals from the MACD and the RSI. The advance only lasted until early May where the stock met resistance near $5.50 and then moved lower to its current range. There is a slight ledge of support forming near $4.30 but there are no clear signals that we can expect a new up leg in the short term.
The evidence at hand doesn’t support a buy at this time. What TDG and the entire energy industry needs is higher prices. Until then the environment demands surveillance for a sign that the pain and suffering has come to an end.
Next time I will compare Brookfield Asset Management Inc. (BAM.A TSX) and Brookfield Infrastructure Partners L.P. (BIP.UN TSX) for Tat in Calgary.
Make it a profitable day and happy capitalism!