Hello Lou.

Could I have your thoughts once again on Inter Pipeline; please and thanks.

Irene in Kelowna BC

Hey Irene,

Thanks for the assignment. This will be the fourth time that I have conducted a study of Inter Pipeline Fund (IPL.UN TSX) since October of 2011. The last investigation was posted on February 22, 2013. The units were trading at $23.18 and Robert was concerned because he felt the company had been taking a beating. The research conducted on Robert’s behalf indicated that the units had pulled back from resistance at $24.00 but in the final analysis it was advised that it would be best to continue to hold his position.

Another run at that the charts will provide an updated snapshot of the opportunities and risks associated with IPL.UN

The three- year chart depicts a generous uptrend that started in March of 2009 when the units were trading at $7.41 generating capital gains and distributions for over four years. At the moment the units have broken below the 50-day moving average and are testing support along the 200-day moving average. On June 3, 2013 management announced that it would begin a $340 million restructuring that would clear the way for the conversion of the fund into a corporation. The company has $2.7 billion in new pipeline projects in development which will move bitumen from the Alberta oil sands for their clients.

The six-month chart details the advance to the 52- week high of $24.47 on April 18, 2013. In retrospect the call to hold the units on February 22, 2013 was correct. At this point in time the units are meeting resistance along the 50-day moving average and there are no strong signals being generated by the MACD or the RSI. The units produce a yield of 4.796% and have tested support along the 200-day moving average a number of times since 2009 and for that reason I continue to see IPL.UN as a hold with this added advice – increase your surveillance to ensure that the units hold support at $23.00 and can move through resistance at $24.00 and  start a new advance.

Make it a profitable day and happy capitalism!

Good morning Lou,

Have you been following Enterprise Group? If so, any thoughts for the next year or so?

Joyce

Hey Joyce,

Thanks for the assignment. In most cases when asked to conduct a study on a stock it is very likely that it is the first time I have taken notice of the company. So thanks very much for bird dogging Enterprise Group Inc. (E TSX) out from under cover for a thorough examination. The company is a consolidator of construction services companies in Western Canada with a focus on clients in the energy, utility, and transportation sectors of the economy. When private companies are rolled up there are immediate savings that go right to the bottom line. Plus there is the added benefit of a wider asset base that can be leveraged for growth. The challenge with a consolidation strategy is to make all the moving parts work in concert.

In terms of a one year outlook I am not able to help you in that regard. I can help identify the trend, support, and resistance that appear on the charts which will form the basis of the evaluation.

The three- year chart indicates that the stock started a generous advance in October of 2011 when it was trading at a rock bottom price of $0.10. The golden cross that surfaced in March of 2012  was followed by a break above resistance at $0.15 in September of 2012 setting the stage for additional gains. In January of 2013 the move through resistance at $0.25 indicated that there was more gas in the tank. From bottom to top E has to stand for excellent!

The six-month chart depicts the support that the stock has enjoyed along the uptrend line and the 50-day moving average. An examination of the long term chart suggests that no serious resistance comes in until $0.89.  Don’t shoot this running horse.

Make it a profitable day and happy capitalism!

Hi Lou,
Could I get your thoughts on Macro Enterprises.
Where do you see this pipeline construction and maintenance company going?

Thanks,

Pete

Hey Pete,

Thanks for the assignment. This will be the second time that I examine the case for Macro Enterprises Inc. (MCR TSXV). The first undertaking was on your behalf on March 8, 2013. The shares were trading for $2.10 and you wanted to know if the advance would continue. The research identified that the RSI was signalling an overbought situation suggesting that the stock was running out of buyers. We did get a pull back to $1.70 by late April which was followed by a strong bounce in May. It was also advised not to shoot the running horse but to watch the trend as we came into the May reporting season for the company.

Another review of the charts will provide further evidence that you can use to determine how best to proceed with this investment.

The three-year chart illustrates the pullback in March into April followed by the move higher ahead of the release of Q1 results on May 22. Worth noting are the buy signals generated by the RSI and the MACD in early May.

The six-month chart provides a close-up of the MACD and the RSI which generated sell signals in late March and buy signals in early May. Currently it appears that the momentum indicators are signalling that investors should expect more selling in the near term. It would be wise to consider taking some profits off the table and waiting for  a better indication of trend.

MCR has been generous but trees don’t grow to the sky.

Make it a profitable day and happy capitalism!

Hey Lou,

What’s happening with YAMANA GOLD?

Yves

Hey Yves,

This will be the fifth time that I examine the case for Yamana Gold Inc. (YRI TSX). The last time was on February 27, 2013 when the shares were trading for $15.82. Judi was interested in knowing what I had to say about the company as she was encouraged by recent earnings reports and production guidance. The research conducted on Judi’s behalf indicated that YRI needed to start beating expectations. The company had missed street forecast in three of the four quarters reported and met them once. Generally that sort of track record will not get a stock moving higher.

It was also identifies that the stock offered trading opportunities but was not a candidate for a buy and hold strategy. In addition the stock was trading in a down channel and was meeting resistance along the downtrend line.  On April 30, 2013 YRI once again reported earnings that missed the street. Management cited lower gold prices and higher costs which conspired to reduce the impact of higher production. The company is currently undertaking cost cutting measures to address the prevailing market condition.

An examination of the charts will provide further insights as to the trend, support, and resistance that should be weighed when considering an action plan for this investment.

The three-year chart is another example of a stock in the grips of a value destroying decline. The patterns identified in February in response to Judi’s email have remained in play. The downtrend has continued unabated as has the resistance along the trend line. Every attempt to move higher has been met with a fresh wave of selling sending the stock lower. YRI hit a 52-week low of $10.70 on May 17, 2013 where it caught a bounce.

The  MACD on the six-month chart has offered great buy and sell signals even as YRI has retreated. Currently the MACD is indicating that the resistance along the 50-day moving average will lead to more selling which could set up a retest of support at $11.00.

YRI has been suffering with all the gold miners as the price of the commodity has continued its retreat which has destroyed value throughout the food chain.

Make it a profitable day and happy capitalism!

Mr. Schizas,

Could you please give your opinion on Endeavour mining.
This is junior stock is so undervalued………

Thank you!

Jocelyne

Hey Jocelyne,

Thanks for the assignment. This will be the first time that I examine the case for Endeavour Mining Corp. (EDV TSX) which produces 300,000 ounces of gold per year from mines in Mali, Ghana, and Burkina Faso. Management expects to see production reach 450,000 ounces per year by 2014 as a mill expansion and a new mine come on stream. The research conducted on your behalf indicates that the cash cost per ounce will reach $1,092 in 2013. Given that the price of gold has been under pressure since the fall of 2011 it sheds a light on the central force that has sent the stock into a steep decline. Another thing to keep in mind is that the forecast mine life at some of their sites is less than 10 years which suggests that the company is on a short leash.

A review of the charts will help identify the trend, support, and resistance that could come into play with EDV.

The three- year chart tells the tale of a stock caught in a vicious sell off.  As the price of gold has weakened it has wrought havoc on gold miners. The 52-week high of $2.56 was reached on October 10, 2012 after which investors were beaten, battered, and burned as the stock declined to a 52-week low of $0.84 on May 17, 2013. Worth mentioning is the death cross that surfaced in January of 2013 when the shares were trading at $2.00. To the informed investor a death cross indicates that it is time to seriously review the assumptions made in buying the stock. Finally when the shares breached support at $2.00 in February of 2013 it was followed by fierce selling to the lows.

The six- month chart provides a close-up of the selling that has gripped EDV since February. The trend is down, and support has been breached multiple times during the decline. None of these factors suggest a speedy return to higher levels. The next test for EDV will be if it can break above the 50-day moving average at $1.06 and move through resistance at $1.10. As has been mentioned in previous posts related to gold miners there is a period of season strength that comes into the metal between July and September which could provide a lift. However this nothing at this point in time to signal a buying opportunity.

Make it a profitable day and happy capitalism!

Hi Lou,
Like may of us I wanted to have some exposure to a Gold Stock. I chose to buy IAMGold and picked it up in and around 11 and then again at 8:50.
What are your thoughts on this company and where there headed in the next 12 months.

Thanks,

Nick

Hey Nick,

Thanks for the assignment. This will be the third time that I examine the case for IAMGold Corp. (IMG TSX). The last time was on September 29, 2010 on a request from Antonia. The shares were trading for $18.16 and Antonia wanted to know if it was a good time buy. The research conducted on her behalf indicated that the shares were range bound with support at $16.00 and resistance at $20.00. It was advised that she trade for profit within the range until there was a break through resistance.

As we came into 2011 the range shifted with support at $18.00 and resistance at $22.0o which lasted until the advance met resistance at $24.00 in late 2011. But that was the end of the good times. Through all of 2012 and into the first half of 2013 producers have under pressure as the price of gold has been in a steady decline.

You mentioned buying at $11.00 and again at $8.50. I generally do not recommend averaging down. Putting more money into a losing position simply concentrates your risk. You are better off to diversify your risk by finding another opportunity outside the sector where your expectations have not been met. I also want to advise you that I can’t provide guidance for an extend period of time. Niles Bohr the noted physicist  is often quoted for the comment that predictions are very difficult – especially about the future.

Another review of the charts will provide information about the trend, support, and resistance that pertain to you investment in IMG.

The three year chart has a number of patterns worth examining. The double top near $24.00 in late 2011 provided a signal to the informed investor that it was time to get off the ride and find shelter. The death cross that surfaced in late December of 2011 as the shares were testing support at $16.00 was another signal that the case for IMG was getting weaker. There was a bounce off of $10.00 in mid 2012 that ran to $16.00 by late 2012 as gold prices recovered somewhat but that was as good as it got. By mid November the rout was on chasing the shares down to their 52- week low of $4.72 on April 18, 2013.

The six-month chart illustrates the resistance that has been encountered along the 50-day moving average. Currently the trend is down with resistance along the trend line, the 50- day moving average, and at $6.00. These are not great indications that its time to buy more or that you can expect a rapid recovery of your losses. On a seasonality basis you want to pay attention to the July through September time frame which is a period of strength for gold stocks.

Make it a profitable day and happy capitalism!

Hi Lou,

Unfortunately I bought this stock when it was trading in the $50 range. It now sits in the $6-7 range. I have been holding onto it in hopes there will be a turn around. As you can see I have taken quite a loss and was wondering if you see any light at the end of the tunnel.

Thanks for your insight.

Kevin

Hey Kevin,

I share your pain! Nothing hurts like finding new lows with your money.The key lesson here is that you need to establish an investment policy that includes preserving capital when you have taken a hit on your investments. There is no law that says you have to ride the bomb to ground zero like Slim Pickens in ” Dr. Strangelove”.

This will be the third time that I examine the case for Niko Resources Ltd.  The last time was on December 14, 2011. Daniel wanted to know if investors could expect continued selling pressure. The shares were trading at $43.50 and was grappling with a relentless downtrend. The research conducted on Daniel’s behalf identified that the shares had to catch a bounce off of $40.00 to set the stage for a trend reversal. It was advised that the best way to manage this stock would be to trade it for profits.

A review of the charts will provide evidence that you can use in making your decision on how best to manage this investment.

The three-year chart is one breathtakingly ugly portrait of pain and suffering. The company has failed to meet analyst’s expectations for the last eight quarters which provides some of the back story to explain at least some of the selling. Make note of the resistance that has come in along the 200- day moving average as the stock advanced on news of a discovery offshore India in late May of 2013.

The six-month chart depicts the advance that started as the stock moved off its 52-week low of $5.13 in late March. The spike high in May on the drilling results reported from Indian has generated a healthy profit of nearly 50% in less than a week. The next test for this stock is moving through the 200-day moving average.

In the case presented and the subsequent analysis there is little to suggest that you will be seeing a quick return to the $50.00 range. Best case scenario in the near term is a continuation of the advance to recover more of your losses.

Make it a profitable day and happy capitalism!

Lou:

I had bought shares in Detour Lake then noted the recent bought deal of 17,500,000 share to raise capital. I sold immediately, my thinking being that the dilution by some 15% would certainly bring the price down. Lo and behold, not so. Instead it held it’s price an went up? What gives?

Dan

Hey Dan,

Thanks for the assignment. Detour Gold Corp. (DGC TSX) needed new money to get the Detour Lake Mine that they have been developing since 2007 into commercial production. Management had estimated that gold would be selling for $1,600 per ounce but unfortunately Mr. Market has not been that generous. If a company needs cash they can sell debt or equity to accomplish their objectives. In this case management decided to sell shares at $8.75 to reach their goals for 2013. The market reaction that ran counter to your assumption about dilution setting off a selling spree may be related to how close DGC is to commercial production at their Detour Lake Mine. Removing the uncertainty of how the firm would proceed motivated investors to go long.

The company had their first pour from Detour Lake this year and anticipate reaching commercial production in the third quarter. Management expects year end production in 2013 to reach between 260,000 and 320,000 ounces. Detour Lake has an estimated mine life of 21.5 years with average production of 657,000 ounces per year and cash cost per ounce of $745. The company expects to increase their reserve base from 15.6 million ounces to 20 million ounces with continued exploration drilling.

An examination of the charts will provide you with better to particulars to help you decide how best to proceed with this opportunity.

The three-year chart tells the tale of what happens when the price of the underlying commodity that a company produces hits the skids. The stock takes a far worse beat down than the commodity itself. There are a number of patterns worth mentioning. The breach of support along the 200-day moving average in December of 2012 followed by the death cross that surfaced in January of 2013 were indications that investors were getting off of the ride. When the shares failed to hold support at $19.00 in April of 2013 it was all over but the crying.

The six-month chart provides a close-up of the downtrend that has gripped DGC in 2013. At this time the MACD and the RSI are not generating a strong buy signal. Although I like the story the charts are not supporting a buy decision right now. Put the stock on your watch list but keep in mind we need a recovery in the demand for gold to give DGC and the entire gold mining sector a break.

Make it a profitable day and happy capitalism!

Lou,

I have ENCANA shares in a LIRA account I cannot access for 5 years. Bought them for $19.77 Jan 2012.

My strategy is to accumulate shares using a DRIP for 5 years. By that time, I expect ENCANA will be worth much more than $20.00.

It has been one year 5 months with no appreciation in value…. I am getting a little impatient.

What is your opinion of my 5 year plan ? Should I wait or cut my losses ?

Regards,

Tim

Hey Tim,

Thanks for the assignment. This will be the second time that I examine the case for the Canadian gas giant Encana Corp. (ECA TSX). The last time a study was undertaken on May 9, 2012 the shares were trading for $21.48 and Lou wanted to know if it was time to pack in his investment. After conducting research on his behalf it was advised that the stock had a fair opportunity to run to $24.00. Retrospectively the stock did hit $24.00 but that was all the gas left in the tank and the stock pulled back.

Another run at the charts will help you better manage your investment in ECA.

The three-year chart illustrates the move to $24.00 in 2012 and the retreat that followed. What is worth noting is that in 2013 the stock has not been able to get through resistance along the 200-day moving average which puts a caution flag on the track as far as further appreciation goes. There is talk on the street that the dividend at ECA is at risk with the pending appointment of a new CEO which adds another layer of risk to the analysis.

The MACD and the RSI on the six-month chart booth seem to be poised to turn lower. In addition the chart depicts a range bound pattern with support at $18.25 and resistance along the 200-day moving average. The best way to approach your investment would be to trade for profit within the range until there is better clarity as to the direction that ECA might track. I am not convinced that a buy and hold strategy will work at this point.

It would also be in your best interest to pay very close attention to how things transpire on the appointment of the new CEO. If a decision is made to cut the dividend it would hit the shares like a ton of bricks.

Make it a profitable day and happy capitalism!

I am way up on Pulse Seismic and it seems on fire currently. While I like the dividend I am wondering if it time to sell. Perhaps buy back in at a lower price. As I bought it at $1.20 & 1.79 the dividend is rich for me. Lou what do you think?

Bill  Surrey, BC

Hey Bill,

Congratulations on a great score! Pulse Seismic Inc. (PSD TSX) is a leader in the Canadian seismic data library sector. The have 28,300 square kilometers of high quality 3D seismic data that generates 87% of sales. The stock spiked to a 52-week high of $3.91 on after catching a bounce off of support at $3.10 on May 16, 2013. But the move has been short lived and I can see why you are concerned about your profits.

A case study of the charts will provide better insight as to how best to manage this investment.

The three- year chart tells the tale of a profitable advance that started in February of 2012. The MACD and the RSI signalled the shift in momentum to the buy side as investors like yourself caught a ride on the escalator to the penthouse of profit. The uptrend line has provided support which has been tested but not breached over the last fifteen months.  There has also been good support along the 50-day moving average. The aggressive advance that started on May 16 was accompanied by above average volume of 273,210 shares. On May 23rd 949,450 shares traded as the stock came off the highs. There were two big blocks that traded hands  at $3.55 that day which represented the bulk of the action. The average daily volume over the last three months has been 84,116 shares.

The MACD and the RSI on the six-month chart both signalled the move higher last week. At this point it appears that the excitement is over. The RSI looks to be moving lower suggesting that more selling is to be expected. The last candle stick on the chart is a long legged doji which indicates that there is uncertainty as to the direction of the market. Bottom line – you are deep in profit take some and as we used to say out west – go buy a hat!

Make it a profitable day and happy capitalism!