Russel Metals Inc. suffering with the oil patch

Jul 15th, 2015 – 1 Comment

The RSI is pointing to an oversold situation that has enticed some investors into hitting the buy button.


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Dear Lou,
What do you think of Russel Metals. It pays a good dividend and it has the earning per share to support it. I think it is in a good position to take advantage of the low dollar. Do you think it is a good investment.
Norman

 

Hey Norman,

Thanks for the assignment. This will be the second time since 2012 that I examine the charts for Russel Metals Inc. (RUS TSX). On December 17, 2012 the shares were trading for $27.46 and produced a 5.09% dividend yield. GT wanted to know if I had any insight as to where the stock might be going.

The research indicated that RUS had been meeting resistance at $27.50 since the fall of 2012 and that the RSI and the MACD were pointing to a weakening of the up channel that started earlier in the year. It was also noted that a gentle downtrend was in place and that GT would have to be cautious if he was going to hit the buy button.

Retrospectively that was the right call. By late June of 2013 the shares had drifted lower to $23.77 where they caught a bounce and began a new uptrend. The stock hit a 52-week high of $37.68 in August of 2014 but that was as good as it got. RUS earns over 40% of its revenue from the energy sector and has suffered with their clients.

Another audit of the charts will inform my thoughts.

 

 

RUS

The three-year chart delineates the downtrend that has dominated the agenda for the better part of the last year. The death cross that formed in late November of 2014 warned that more selling pressure could be expected. There was a trade that surfaced in January of 2015 as the MACD and the RSI signalled that buyers were moving into the market. The advance hit resistance at $27.50 by April and reversed to a decline by May.

 

 

 

 

 

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The six-month chart puts the spotlight on the resistance at $27.50  and the sell signals generated by the momentum indicators. RUS pulled back to the 52-week low of  $21.59 earlier in the week. Which brings us to the question of how best to proceed. The RSI is pointing to an oversold situation that has enticed some investors to hit the buy button. In addition the dividend yield of 6.89% is calling like the Sirens of Titan.

However there are no indications that we can expect a trend reversal in the short term. I would advise patience at this point. Continue to monitor the stock for signs that the selling has abated and buyers are in control of the market. If you need to pull the trigger treat it as a speculative buy and purchase a slice now and see how the stock behaves.Watch for resistance at $23.50 and then at $25.50.

Next time I will insect the charts for Crescent Point Energy Corp. (CPG TSX) for Debbie.

Make it a profitable day and happy capitalism!

 

Make it a profitable day and happy capitalism

 

 

 

 

 

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