Hello Lou,

You seem to have some insight on PBN. Last time we spoke you were talking about a head fake on this one. It seems a new bottom has been reached and I am wondering if we are closer to an entry point. I own some of this already and am using it as a dividend yield/long investment. It is tempting me again at this level.

Thoughts?

              Frank

Hey Frank,

I do recall our email exchange on the head fake headline published on October 15, 2010 on an assignment from Heather.  The stock was trading at $22.02 at that time. Unfortunately the shares went into a steady decline and  gave up a lot of ground. This will be the fifth post on PetroBakken Energy Ltd. (PBN TSX) since the original analysis.

Let’s look at the charts to see if the itch you want to scratch is worth the risk.

The three year chart is a classic example of an established downtrend shredding investor value. The shares peaked at $34.00 in October of 2009 and have been struggling ever since.

Some investors want to argue that the fundamentals are great and the company has huge potential. But ask yourself this. If the stock is going down and has been for close to two years does it matter? Also worth a mention is that in a downtrend there is the temptation to anticipate a bottom instead of confirming that the selling is over and investors are willing to buy the stock. Since the release of the first analysis on October 15, 2010 PBN is off over 30%. That always hurts.

The six month chart although generally not very impressive once again oozes temptation. The move off the rock bottom that started on July 19, 2011 appears to have broken the trend line that started in early March. In four of the last five days the volume of shares traded exceeded the average daily volume of shares over the last three months.

Some of the commentary on the move up from $12.40 on July 19, suggested that investors who had shorted PBN were buying to lock in their profits. If that is the case its a good sign.  When the shorts move out it allows the buying to get some traction.

There is also a pennant forming on the chart which is a continuation pattern. In the majority of cases the stock will move higher out of a pennant formation. Not to be ignored is the 50 day moving average which is a resistance level that has to be breached if the stock is going to advance further.

At this point with the MACD and RSI indicating a shift in momentum, the shorts on the buy side, a pennant formation on the chart, increasing volume, a 6.6% yield, and the energy sector entering a period of seasonal strength, it looks like its time to scratch your itch.

Be advised that the release of Q2 results is scheduled for August 10.

Make it a profitable day and happy capitalism

Lou,

Is RIM a buy at $55 or is it in the dog house.

Thanks,

 Kurban

Hi Kurban,

Right now I would say that Research In Motion Ltd. ( RIM TSX) needs some exciting new developments to jump start a return to an uptrend. The current environment has RIM playing second fiddle to Apple in the smart phone space. Your question regarding an entry point at $55 is interesting and demands further review.

 

 

The three year chart provides ample evidence that RIM has been struggling since September of 2009 where it met resistance at $95.00 and then gaped down. What is abundantly clear is that there is lots of resistance and every attempt to rally is met with selling.

The barriers to a breakout come in at $60.00, $70.00 and then at $80.00. There is also a death cross on the chart that formed in November of 2009 putting a caution flag on the track.

More to your question is where support comes in and if $55.00 is a good entry point.

 

The six month chart illustrates the resistance that RIM has met along its 50 and 200 day moving averages. Every effort to rise has been met by selling. The support level comes at $55 didn’t hold and now the question is will we get a bounce off of $50.00 or do we need to retest $47.50?

The MACD signaled the rise from $50.00 in July  to  resistance at $57.50 at the beginning of August. At this point it looks like the MACD is turning lower which would suggest that we will be retesting $50.00.

I think that until RIM leap frogs over the competition with a knock em dead new product  they are playing catch up in the smart phone space. It will be interesting to see how their management responds and what sort of things that they might be cooking up in their skunk works. But right now there has been muted enthusiasm for the new products rolled out and that has been reflected in the stock price.

Keep your powder dry and remember the best time to buy a stock is when it has established an uptrend. Anticipating a bottom could see you finding new lows with your money.

 

Happy Capitalism!

Bank of Canada (photo by Mike Gee)

Hi Lou

Wrote to you once before and you were gracious enough to respond back so here goes again. I read earlier today that the BOC is considering dropping the interest rate again, maybe 50 bp, my question is how long can low rates last? At what point do they start sending them back up. I can’t say I am not enjoying this as my variable rate mortgage is sitting at 2.75 right now so I am hoping it lasts for at least a year…..but that might be wishful thinking.

Hi Dan,

Thanks for writing as I am always happy to help where I can.  Your information is correct the Bank of Canada is expected to cut rates by 0.50% tomorrow. That would put the rate at which banks lend to each other down to 1%.

In the United States the rate is being managed within a range between 0.00% and 0.25%. The same pattern is in play around the world as the financial crisis that began in the US - mortgage market wreaks havoc in every economy.

Central Banks such as the Bank of Canada have one lever available to them and that is short term interest rates. By all indications they have put the pedal to the metal in an effort to get their economies going.  As there is usually a lag between cutting rates and seeing the cuts hitting main street it could be a while before The Bank of Canada sees the need to move rates higher.

The current forecast for 2009 is for negative GDP growth with a tame increase in 2010.

I think that your variable rate call on your mortgage is good for the one year period you asked about. But keep in mind that the trend is your friend till it ends!

Happy capitalism!

U.S. President-elect Barack Obama met with House Republican leader John A. Boehner, left, and House Speaker Nancy Pelosi on Capitol Hill on Monday. Source: New York Times

Dear Lou

As a regular listener I do not miss your 06:50 segment on the Oakley Show! Today (January 5th) you suggested that business people must dial themselves into the government’s latest initiatives to stimulate the economy.

My wife’s company may very well qualify for some support from the government and therefore I am willing to help do some research on the matter; which may, in turn, help my family. Would you be able to assist by pointing me to the proper government information packages on this matter?

My wife’s company has two divisions: “Swissmar Imports” & “Swiss Peak”. They import fine European house wares and Swiss Army knives/ Swiss Military watches respectively.

Have a happy capitalism day.

Joe

Hi Joe,

My point today on the Oakley Show was that with the Obama crew about to shovel $775B into the U.S. Economy and the Canadian government making noise about a $30B stimulus package you need to get on the bid lists as a recognized supplier to various levels of government.

Here are three:

The Government of Canada;

http://www.contractscanada.gc.ca/en/busin-e.htm

The Province of Ontario;

http://www.canadabusiness.ca/servlet/ContentServer?pagename=CBSC_ON/CBSC_WebPage/CBSC_WebPage_Temp&c=CBSC_WebPage&cid=1176175892192&lang=en

The City of Toronto;

http://www.enterprisetoronto.com/index.cfm?linktype=mainlink&linkId=99&content_id=466&fromurl=center

Another way to get a piece of the action is to track those who score government contracts and see if you can become a supplier to them. You never know who could use a Swiss Army Knife!

Happy Capitalism!

Bank of Canada

Hi Lou,

I listen to you daily on the radio, and enjoy your commentary. Do you know where I can find info on the direction of the Bank of Canada rates, that is, what do economists expect to happen…versus reading about it after the fact? Besides listening to you, is there a website I can go to and review what people think might happen?

I am moving into a bigger home this month and will be getting a mortgage (variable rate) so I have a personal interest.

Thanks.

Tony.

Hi Tony,

Great question!

There are quite a few places to go for information on interest rates.

You should survey the sites of the major Canadian Banks. Their Economics Departments publish lots of great reports on many subjects. Here is the link to the RBC site that will help.

http://www.rbc.com/economics/quicklink/pdf/rates.pdf

The Bank of Canada site will also provide you with lots of useful information on rates and policy. Spend some time navigating the site and you will be rewarded for the effort.

http://www.bank-banque-canada.ca/en/index.html

If you go to the bottom of the Bank of Canada page you will see they even give you the calendar of their scheduled interest rate announcements which will give you milestones to be aware of.

Enjoy the new house!

Make it a great run to Christmas and Happy Capitalism!

Hi Lou
I really look forward to your reports on AM640
Is the possible US Government financial bailout much more serious than the one that took place during the saving and loans crisis? If so why?
Looking forward to your comments.
Regards
Paul

Hi Paul,

To my thinking the Resolution Trust Corp was handed damaged mortgages and institutions to patch up and resell into the market.

The Paulson Plan is plagued by the fact that the government will be buying the assets and then reselling them. But at what price will they be buying and selling? Valuation and visibility is what has the market frozen now so it will be difficult to imagine the true value of these toxic instruments. In a no bid market the value is zero.

I am also concerned about the order of magnitude of the problem. Every cost estimate that has been issued by the Bush Administration has been so low as to be laughable. Early last week the estimated cost according to Paulson was hundreds of billions, on Friday $500B was bandied about; by Monday we were up to $750B. It’s like catching a greased pig!

The Resolution Trust Corp solution to the Savings and Loan problem was estimated to cost $20B. The final cost was $122B. As everyone knows I am not that bright but having seen the original version of this farce I think the total cost will be much higher. Earlier in the week I mentioned a $3-4 Trillion cost estimate. I hope I am wrong but with the past as prologue I’m prepared to be less optimistic about cost containment.
Happy Capitalism!