TransAlta Corporation offers a 10.75% dividend

Oct 21st, 2015 – 1 Comment

Setting up a trade


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Lou Schizas is an equities analyst, investor, entrepreneur, professor and television and radio personality – and a true believer in the happiness-inspiring powers of capitalism.


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TA LOGO

Mr. Lou

I read your columns with great interest. Can you please comment on TA? Have you reviewed this recently?

Thanks

Best Regards,

Arun

 

Hey Arun,

Thanks for the assignment and your interest in the cases I have studied for investors like you. This will be the sixth time since 2012 that I inspect the charts for TransAlta Corporation (TA TSX). The last was on October 1, 2014 when the shares were trading for $11.75 and Jeff wanted to know if my opinion from 2013 was still valid.

The review identified that the downtrend that started in October of 2011 was still in place and that the stock wasn’t able to hold support at various price levels. What was also mentioned was that there was resistance along the moving averages and no evidence that investors could expect a trend reversal.

Unfortunately that was the right call as TA continued to give up ground and pulled back to the $9.00 range by mid December 2014. Another study of the charts will inform my opinion.

 

TA

The three-year chart presents a number of patterns worth exploring. The leg up that started in December of 2014, as TA bounced off $9.00, came to an end at $12.00 by the end of April, 2015. The stock breached the 50 and the 200-day moving average in May as investors reacted to the election of an NDP majority government in Alberta.

The selling continued through late June of 2015 when a death cross formed. By July the stock broke below support at $9.00 and made its way to a 52-week low of $5.58 in September where it became oversold. The MACD and the RSI were both signalling a buy in late August ahead of the bounce off the 52-week low.

 

TA2

The six-month chart indicates that TA has moved up and through the 50-day moving average and is building a base near $6.50. We need to respect the downtrend and the death cross but the 10.75% dividend yield might be worth collecting some rent from these oversold assets. At these levels there isn’t much resistance until $9.00.

 

 

 

Next time I will conduct a comparative analysis of Crescent Point Energy Corp. (CPG TSX) and Cardinal Energy Ltd. (CJ TSX) for Laurie.

Make it a profitable day and happy capitalism!

Categories: Utilities
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