Hi Lou,

Look at the volume on CUM and the slide in the stock price. There seems to be another round of insider selling. What do you think of this stock?

Thanks,

Judi

Hey Judi,

Thanks for the assignment. Copper Mountain Mining Corp. (CUM TSX) had a great run as it developed its deposit and built their mine in Southern British Columbia. I think what you are seeing is a typical investor response to an organization having met some of their objectives. Investors take profits when they think that all the currently available good news is already baked into the stock price. There are a number of factors to consider when examining the case for CUM, not the least of which is the price of copper itself. A review of the charts will highlight some of the details that you should consider going forward.

The one-year chart for copper provides some of the answers as to why the stock has sold off. As goes copper so goes CUM. The price of the commodity hit resistance at $4.50 in July of 2011 and then broke support in August. There has been some recovery in the price of copper as it bounced off of $3.00 in October. The three-month up move seems to have met resistance against the 200 day moving average and the RSI and MACD are both suggesting a pullback from these levels.

The three-year chart for CUM outlines the resistance at $8.00 the shares tested but could not break above in the spring and summer of 2011. The MACD generated a sell signal in early July that saw the stock fall back to the October low of $3.24. A comparison of the chart for copper provides ample evidence of how the shares and the commodity move in lockstep. The stock caught a bounce off of the lows and enjoyed a nice advance until it met resistance against the 200 day moving average.

The MACD on the six-month chart has generated some great buy and sell signals for traders. Make sure to consult this indicator when making decisions on the stock. The MACD  currently looks to be turning up and the shares appear to be holding support along the 50 day moving average.

The 2012 plan for CUM is to ramp up production to between 85 and 90 million pounds of copper. The estimates are that at target production levels the mine will be operating for about 17 years. I like the story but what is needed is a convincing move to the upside. If the shares can make a move through $6.00 it has little resistance back to $8.00.

Make it a profitable day and happy capitalism!

Well Lou, is it time to take a look at RIMM…..I’m thinking a double bottom could start to form over the next few months….or should we start slow dollar cost buying.

Jay

Hi Jay,

This will be the sixth time that I have run the charts on Research in Motion Limited (RIMM NASDAQ). The first time I looked at the stock was on August 9, 2010 for Kurban.

The shares were trading at $54.93 and it was advised that the company was playing catch up with the competition and that the stock was in a downtrend that started in 2009. It was also cautioned that anticipating a bottom can result in the unkindest cut of all, finding new lows with personal cash. Unfortunately that was precisely the right call.

The last time I examined the case for RIMM was on October 21, 2011 on an assignment from Bob. The shares were selling for $22.61 and the analysis suggested that the stock was neither a buy nor a hold. Again the right call but no less painful for investors who continued to hold.

Let’s take another run at the charts and see if the worse is behind RIMM.

The three year chart is one of those rides that make me nauseous just looking at it. When you are holding a stock in a free fall you have to gird your loins and sell.

The downtrend that started in March of 2011 is still in place as is the death cross that formed in May. Clearly there have been plenty of opportunities to sell and preserve capital.

You asked if a double bottom could form in a few months. It is possible but I would want to see it and not anticipate it. The failure to hold support at $20.00 is a real concern.

The six month chart illustrates the bounce off of the December 20th low of $12.45. Most of the advance was fuelled by takeover rumours. When the management changes were announced January 23, 2012 it did nothing for the stock.

At this point I have to maintain my stance that the risks outweigh the opportunity. Until we get a double bottom or some other indicator that the selling has abated and buyers want to own RIMM I would not be stepping into the fray.

Confirm the bottom, don’t anticipate it.

Make it a profitable day and happy capitalism!

Hi Lou,

I have a large GIC coming due and I am thinking of buying Mullen Group for the yield.

Thanks in advance,

 John

Hey John,

Thanks for the assignment. Mullen Group Ltd. (MTL TSX) operates in the specialized transportation sector servicing the oil and gas sector in Western Canada. In addition they also provide clients outside the oil patch with logistics and trucking .

First thing I want to suggest is that you embrace diversification with the money that is coming out of your GIC. When  you invest in a GIC you accept a lower rate of return for the guarantee of a return of capital. That is not the case with a dividend paying common stock.

MTL offers a 5.2% dividend yield but with that greater return you have to accept the possibility of a loss of capital. The best way to mitigate that risk is by holding a basket of dividend paying stocks from sectors that are likely to benefit from the economic environment.

A review of the charts will provide some depth to your considerations.

The three year chart indicates the shares have been range bound for the last year with resistance at $20.50 and support at $18.50. What puts a caution flag on the track for me is that the stock is trading below the 50 and the 200 day moving average which adds more risk than if it were trading above those levels.

The  MACD on the six month chart has been generating reliable buy and sell signals over the period. At this writing the indicator appears to be turning lower as is the RSI.

On a fundamental basis the company has been delivering earnings that beat the street in the last five quarters but hasn’t really benefited in a substantial way from the effort. The next quarterly report is scheduled for February 22, 2012.

If you are going to buy MTL with a portion of your GIC assets, I would wait until the MACD generates a buy signal before jumping in. From there you will have to pay more attention to the basket of dividend paying common stocks then you ever spent on the GIC. Higher returns require more effort.

Make it a profitable day and happy capitalism!

Hello Lou,
I came across your about report published by globeinvestor.com on March 18 2011.

I have recently been looking at the technical charts for PBN. I am interested in making an investment.

Could you please provide your latest opinion.

 Many thanks,

Chandra

Hey Chandra,

This will be the sixth time that I have posted on the prospects for Petrobakken Energy Ltd. since October 15, 2010. Up until my last post of July 25, 2011 I had been very cautious on the stock given that it had been in an established downtrend for close to two years.

 In July there were a number of indicators that suggested that the shares could catch a lift off of $14.45. Unfortunately resistance along the 50 day moving average was formidable and the decline continued. A rock bottom was hit on September 30 at $6.o5 and once we got into October of 2011 the shares started to move up driven by talk of takeovers of mid tier producers.

An examination of the charts for PBN will provide more evidence to help you with your decision.

The three year chart illustrates the resistance along the 50 day moving average back in July. Currently the RSI has been in overbought territory for some time which is a sign of strength.

The MACD on the six month chart illustrates the buy signal that formed in October and the golden cross that is about to surface. At this point there isn’t much resistance until $20.00.

With a dividend yield of 5.9% and management having recently addressed some balance sheet issues it appears that PBN has more gas in the tank. Longer term the company has a large land base and an extensive inventory of development drilling targets that should help drive increased output without the risks associated with exploration.

With the bottom in, the resolution of the debt issues that were casting a pall on the shares, the emergence of a new uptrend, and takeovers in the sector, PBN is a buy.

Make it a profitable day and happy capitalism!

Lou,
I have held this asset for some time and have generally been satisfied with it but recently it has been shedding value faster than its counterparts. May I have your thoughts as to whether this is due to falling natural gas prices or something else I should be watching.
Your views will be appreciated

Thanks,

Jack

Hi Jack,

I last examined the case for Bonavista Energy Corp. (BNP TSX) on May 25, 2011 when the shares were trading for $28.26. At the time the stock looked like a hold with good long term prospects. However the stock broke support along $27.50 in early August of last year.

BNP’s production is leveraged to natural gas and it would be hard to imagine how they could avoid the consequences of weaker prices for the commodity. Lets spend some time with the most recent charts to see how best to proceed.

The three year chart depicts the support at $27.50 that was breached in early August of 2011. The MACD and the RSI both signalled the shift in momentum towards selling and a death cross formed shortly after the break below support. Currently there is support at $22.00.

The one year chart for natural gas tells part of the story behind the selling pressure that has gripped BNP. With 61% of the company’s production on the gas side it is clear the shares got sideswiped as the commodity sold off. Fortunately most of the natural gas is liquids rich providing better returns that simple dry gas.

The company upped its 2011 capital budget to $600 million from $375 million to shoot for a more balanced output of natural gas and oil. In my last post it was noted that the company relied on natural gas for 66% of its production so there has been some progress made. The capital budget for 2012 is estimated to be in the $400 – $425 million range.

The RIS on the six month chart indicates that shares are becoming oversold. The MACD has yet to signal a shift in momentum to the buy side.

Another factor that hurt BNP was that they missed street estimates in Q2 and Q3 of 2011. Although frankly it’s hard to make forecast when commodity prices work against you. The company is scheduled to report Q4 on March 05, 2012.

BNP is a prime example of why you have to watch your stocks closely for changes in the environment that could affect your investment. In this case it was a selloff in the price of natural gas and the missed estimates.

Currently I would look for a bounce off of $22.00 and some buying to come into the shares during the period of seasonal strength for energy shares. With a dividend yield of 6.5% you are getting well paid to wait.

Make it a profitable day and happy capitalism!

Hello,

What are your thoughts on Suncor (SU-TO)? I am very intrigued by the current price per share versus it’s 52-week high. Any thoughts would be very much appreciated!

Thanks,
Darryl

Hey Darryl,

I last ran the charts for Suncor Energy Inc. (SU TSX) on November 19, 2010. The assignment came from Ed and at the time the stock was trading for $33.59. It was suggested that the shares were building a base and that the stock was coming into its period of seasonal strength. In addition it was advised that $32.00 would be a good entry point.  

My mentor Steve Kalil taught me that the bigger the base the better the case for an investment. Once a stock breaks out above of its base building resistance there is money to be made. In this case that is exactly what happened. However this was not buy and hold investment but a case of capturing profits when available.

An examination of the charts will help inform the opportunities and risks associated with SU.

The three year chart tells the tale of a stock that built a base in 2010 and ran from $32.50 in late November to a high of $47.50 by March of 2011. A sweet 46.15% return in four months. But that was all that the shares had to give.

From the March high SU proceeded to shred capital all the way to $23.97. Ouch! That has to hurt! Once again an object lesson in capturing profits when available and not getting married to a story.

The MACD and RSI have both generated some nice buy and sell signals over the last six months. At this moment the RSI is moving into overbought territory and the MACD seems to be flattening out. The big test going forward is resistance along the 200 day moving average. If it get and stay above that level then there is hope for a further advance.

With energy stocks entering a period of seasonal strength that will run until May it’s a good time to make a move if you are so inclined. Just remember that the trend is your friend till it ends!

Make it a profitable day and happy capitalism!

Hi Lou,

I would appreciate your opinion on Parallel Energy Trust, PLT.

Ken

Hey Ken,

Thanks for the assignment. Parallel Energy Trust (PLT.UN TSX) just went public in April of 2011. The issue was priced at $10.00 and raised over $400 million. The focus of the enterprise is in the United States where they have bought producing properties with low cost development potential.

The company is the second new trust that has been formed since the ‘ Halloween Massacre” of 2006. The new structure skirts the changes that crushed the domestic trust sector, by operating outside Canada. This is just another example of the creative strength of the financial community, which when regulated out of business finds another way to skin the cat. Gotta love the relentless pursuit of higher yields on distributions! Expect more of these new trusts based on foreign operations to come to market.

Unfortunately the units have been under selling pressure since they came to market. A review of the charts will instruct us on how to proceed.

The one year chart tells the tale of eroding capital but at the current price the yield on distributions is 11.5% which is very attractive.

The MACD and RSI on the six month chart are indicating that the bounce that the units caught in late December is over. There does seem to be some support at $7.75 but I would want to see the selling abate before I stepped up to the plate.

I like the business model and with a reserve life index of 11.1 years and 189 development drilling targets on their Texas land base, I think this one should be on your watch list for a trend reversal.

Management claims that they can maintain production with annual capital expenditures of between $2.5 and $3.5 million. The cap ex budget for 2012 has been set at $16.5 million so expect an increase in production. The forecast for 2012 is for an exit rate of between 4,600 and 4,800 barrels of oil equivalent per day.

Make it a profitable day and happy capitalism!

Hi Lou,
Was wondering what do you think of SLF. If they do cut their dividend, will it affect their stock price? Also, what are the chances that they will reduce their dividend, given that Manulife paid dearly for doing that.

Thanks
Cedric

Hey Cedric,

Thanks for the assignment. Sun Life Financial Services of Canada Inc. (SLF TSX) is under pressure but they are not alone. The insurance industry as a whole is struggling with the poor returns on invested capital arising from market conditions since the fall of 2008.

In an effort to maintain its dividend the company announced that it will be exiting some businesses in the United States including the sales of variable annuities and individual life insurance. Those steps reported in December of 2011 did not prevent Standard and Poor’s from putting a watch on SLF’s debt rating with negative implications.

You asked what would happen if the company cut it is dividend? Without a doubt it would sell off. Currently the yield is 7.2% which is way ahead of what is being offered by similar companies. If you want to see the comparables go to globleinvestor.com and look at the competitors tab for SLF. In order to get in line with the dividend paid by competitors the stock has to gain over $6.00 a share or the payout has to go down.

Management is always reluctant to cut dividends but in the face of the inevitable the bitter medicine is taken. Basically you can’t keep paying out if you are not bringing it in!

A review of the charts will help identify the trend that is in play and possible outcomes for the stock.

What the three year chart illustrates is a stock with a defined downtrend that started in February of 2011 when it hit a 52 week high of $34.39.

If you look closely at the chart there is a double top that formed signalling that it was time to get out of Dodge. By July of 2o11 a death cross had formed and the shares breached support at $28.00. By the fall of 2011 support at $24.00 broke, evidence of continued weakness.

The six month chart indicates that there has been some buying that came in at $18.00 but the volume has thinned out. Volume has not been greater that the three month average volume for the last 15 trading days. Generally I like to see a move up confirmed by increasing volume.

In addition the MACD and RSI are indicating that the advance is weakening at this time. Overall I would not be chasing this stock. The trend is down, there is a death cross on the chart, volume is thinner than I would like, and the dividend is rich compared to its peers.  These are not reasons to be a buyer.

Make it a profitable day and happy capitalism!

Hello Lou,

I Would like your comments and investigation on AvenEx Energy. This a little followed stock in the O/G field, a small growing producer, with a perhaps, too large dividend. The 50ma is below the 200ma, but recent volume is higher than usual, and appears to be breaking out to the positive. Look forward to your input and many thanks Lou.

Cheers,

 Jim

Hey Jim,

AvenEx Energy Corp. (AVF TSX) has declared its mandate is to provide stable and sustainable dividends and  modest growth. It is right there on their website. If that meets up with your investment objectives then it is a good fit.

The yield on the shares is 9.9% so by the law of 72 your money will double in 7.27 years. Of course that is assuming no disruptions to their business plan or external events that have negative consequences for oil and gas prices.

A review of the charts will provide greater insight as to the potential offered by AVF.

The three year chart indicates that the stock was under pressure through the spring and summer of 2011 but caught a bounce in October reversing the downtrend. The question at this point is if AVF can break through resistance at $5.75.

The MACD and RSI both generated accurate buy and sell signals over the last six months. In October the RSI indicated that the shares were oversold and the MACD broke above the signal line as the stock moved off of $3.50. The run to $5.40 in mid November produced a 54% return in five weeks if you caught the entire ride.

Currently the RSI is moving lower and the MACD is not suggesting a buy. There is support at $5.50 and at $5.25 where the shares could start building a base. One concern I have with the stock is that the data stream is a bit thin. There is not a lot of news about activities that the company is undertaking. What I have noted is that the distributions were cut from $0.06 per month in 2010 to $0.045 per month in 2011.

The charts for AVF seem to indicate that at best the stock will consolidate in this range and you will be paid an attractive yield to wait for some of the modest growth they promise.

Make it a profitable day and happy capitalism!

Hi Lou,
Coming to your blog is always insightful. I was looking at a few junior Oil/gas exploration companies and narrowed down Open Range Energy on the basis of growth in 2012.It would be great if you could enlighten me with your views.

Thanks,
Nadeem

Hey Nadeem,

On July 29, 2011 I ran the charts for Open Range Energy Corp. (ONR TSX) on an assignment from Joe. At the time the shares were trading for $6.49. It was suggested that the combination of the exploration and production side of the business and the Poseidon Concepts water handling unit had more in it and that investors should let the horse run.  Retrospectively that was the right call.

In November of 2011 the company reorganized its structure and spun out Poseidon Concepts Corp. (PSN TSX)  to existing shareholders. The results if you look at the closing prices of both shares produced a combined value of $13.51. Not a bad return in six months.

Now ONR is a pure play exploration and production company. A review of the charts will provide greater insight into the prospects for the shares.

The three year chart tells the story of a stock that peaked in November after the lift that started in October on the announcement of the intention to reorganize. The uptrend that was in place has been breached as well as the 50 day moving average. The MACD and RSI also indicated that it was time to capture profits.

The six month chart provides a close up of the selling pressure that has gripped the stock since the November high. Presently the MACD and RSI are suggesting that the selling pressure it not about to abate.

At this point it would be best to wait for the downtrend to reverse before buying. The company reported its 2011 exit rate of 6,350 barrels of oil equivalent per day on December 22, 2011. Management expects to exit 2012 with 10,000 boe a day and will be reporting its capital budget for the year soon.

ONR has some interesting drilling targets on its land base and is worth keeping an eye on but you will have to be patient to get the most out of your investment.

Make it a profitable day and happy capitalism!