Russel Metals Inc. in the grips of a downtrend

Oct 30th, 2015 – Comment

Low oil prices= fewer wells = lower demand for pipe


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Hi Lou,
I would ask you about the prospects of Russel Metals.
Thanks,
Glenn

 

Hey Glenn,

 

Thanks for the assignment. This will be the third time since 2012 that I investigate the case for Russel Metals Inc. (RUS TSX). The last was on July 15, 2015 for Norman. The shares were trading for $22.07 with a dividend yield of 6.89%. Norman thought the low dollar provided the company with an advantage and wondered if RUS was a good investment.

The analysis conducted on his behalf indicated that the stock had been selling off since August of 2014 where a double top pointed to a trend reversal from the advance that started in late June of 2013 when RUS was trading near $21.00. But the high near $37.68 was as good as it got.

The MACD and the RSI generated sell signals followed by the shares breaking below the 50-day moving average in September of 2014 and then by a breach of the 200-day moving average in November. When a death cross formed in December of 2014 it alerted the knowledgeable investor that they could expect additional selling pressure.

It was advised in July of 2015 that resistance could be expected at $23.50 and that Norman would be best served by being patient. Retrospectively that was the right call as RUS pulled back to a 52-week low of $18.23.

Another inspection of the charts will inform my opinion.

 

RUS

The three -year charts indicates that the downtrend that started last year is still in place and that the stock hasn’t been able to break above the trend line with conviction. There have been some trading opportunities over the last year but the buy and hold investor had to be satisfied with the dividend which as of this post yields 7.45%.

 

 

 

 

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The six-month chart provides a close-up of the buy signals generated by the MACD and the RSI as the stock came off the July lows. The advance hit resistance along the 200-day moving average in October. Currently the shares are holding support near $20.00 but there is little evidence that we can expect a new leg up in the short term.

 

Next time I will re-examine the charts for New Flyer Industries Inc. (NFI TSX) on an assignment from Kim.

 

Make it a profitable day and happy capitalism!

 

 

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