Lou,
First let me say thanks for your articles on globeinvestor.com.

Why doesn’t the market like Husky?

It is not expensive, with a PE of 10.7
a yield of 4.8, good balance sheet, and
yet its 50 day moving average looks
like it wants to cross over its 100
day moving average.

Thanking you in advance for your comment.

Joe

Hey Joe,

Thanks for the assignment. I last undertook an analysis of Husky Energy Inc. (HSE TSX) for Will, on February 3, 2010. At the time the shares were trading for $27.13 and were oscillating in a down channel. You ask why the street doesn’t like the stock and the simple answer is that the company has failed to grow sufficiently to meet expectations. It is not the case that they have failed to grow but that they have failed to meet expectations.

My old pal Peter Jahn taught me many years ago that managing investor expectations is the toughest job in the world. The energy sector is very much a what have you done for me lately type of environment. If you are not bringing the roses in terms of new production, the discovery of new fields, and increased earnings, you had better get used to being ignored.

A review of the charts will provide additional information to help you decide how best to proceed with HSE. Keep in mind that the company is scheduled to report its Q4 results on February 9, 2012, which will provide additional information as to how they are progressing.

The three-year chart tells the tale of a stock you want to trade not hold. There have been many opportunities to buy and sell on pops and drops but holding the shares would have resulted in a loss of capital. Also worth noting is the resistance that forms at $27.00 and again at $29.00.

The MACD on the six month chart has generated healthy buy and sell signals over the period. Make note of the resistance along the 200-day moving average. Every attempt to move through the barrier has so far failed. From the information available at this time it would be best to wait for the release of Q4 results to ascertain if HSE has the strength to break above resistance. If it does then there would be a potentially short but profitable trade to follow.

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!

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!

Hi Lou,

Could we have your opinion on Interpipeline for 2012. 

Thanks,

 Irene in Kelowna, BC

Hey Irene,

I last ran the charts for Inter Pipeline Fund (IPL.UN TSX) on October 17, 2011. When Andrew gave me the assignment the units were selling for $16.33. At the time it was observed that there had been a break above resistance at $16.25 and there appeared to be more gas in the tank. Retrospectively the analysis was correct with the price advancing to $18.67 producing a 14.3% capital gain.

A review of the charts will provide some insight into the possibilities for IPL.UN over the next 12 months.

The three year chart provides a view of the advance that followed my last post. In early November the Board of Directors declared a 9.4% increase in monthly distributions which will always attract investors hungry for yield.

What is notable on this chart is that there is solid support along the trend line and the 50 and 200 day moving averages. There have been tests of support but no serious breaches.

Does that mean that the units can only go up? As we all know the past is history and the future is a mystery.What it does implies is that you have to be ever vigilant and look at the charts of all of your investments each day to see if the situation changes.

The six month chart indicates that there is some short term resistance that has formed at $19.00 and that perhaps the lift since the increase in the distributions has gone too far to0 fast.

The best possible outcome for the near term would be for the units to build a base and tighten up the gap between the 50 and 200 day moving averages.

The momentum indicators are not generating strong signals for a buy or a sell. With the 5.6% yield and  the strong business case I would be a buyer until we see a change in direction. The trend is your friend until it ends.

IPL.UN carries 35% of oil sands volume and 15% of Western Canadian conventional oil volume for a total of 800,000 barrels per day. In addition they process 40% of natural gas volumes exported from Alberta. I don’t see much that could upset this apple cart today but that’s why I advise watching your investment every single day. Things change and you have to be informed and ready to act.

Make it a profitable 2012 and happy capitalism!

Hi Lou,

Niko Resources has been hammered as of late and is now trading at half the 2011 highs. With oil prices averaging $100 and plenty of oil and liquid natural gas blocks on tap for drilling in Indonesia and Trinidad, where do you see this stock going on a technical basis? Do you see continued downward pressures on the shares?

I would greatly appreciate your analysis,

Thank you so much for your time,

Daniel

Vancouver, BC

Hey Daniel,

I last ran the Niko Resources Ltd. (NKO TSX) charts on April 08, 2011 for Jag. At the time the shares were trading for $93.38 and I advised caution. The stock had failed to break above resistance at $94.00 on thinning volume and the MACD was turning lower. It was suggested that the best course of action was for Jag to keep his powder dry. Retrospectively that was the right call. 

It was noted that NKO would be spending a good part of 2011 on geophysical analysis of its seismic data which doesn’t usually get investors hitting the buy button.  A review of the charts will provide a new analysis of the prospects for NKO.

The three year chart illustrates the brutal selling that has come into the stock since the April 8, 2011 post. On a positive note the downtrend has been broken and a double bottom seems to be forming. Again I advise caution. If you are looking for an advance NKO has to catch a bounce off of $40.00.

The MACD and RSI on six month chart signaled the move up from $40.00 in early October 2011 to the high in early November at $57.50. A 43.75% return in thirty days is sweet to say the least.

Shortly after the shares hit $57.50  the MACD generated a sell signal that is still in play. At the moment I would not be a buyer until the MACD and RSI indicated a shift away from the selling pressure that has been hanging over the stock for five weeks.

If it catches a bounce off of $40.00 it could be an indication that NKO is ready to reverse the downtrend. Until a new uptrend is established be prepared to trade this one for income.

Make it a profitable day and happy capitalism!

Good morning,

I have owned Penn West since 1999. It is down to almost a third of the price it was at its peak in 2006. They have also decreased their dividend from 34 cents to 9 cents during that time. Do you think I should hang on awhile longer or sell and take my losses? Some of the shares are within my RRSP.

Thanks
Pam

Hi Pam,

The first time I ran the charts for Penn West Exploration (PWT TSX) was on May 24, 2009 for Colleen. The units were trading for $13.99 and it was advised that the company had solid management and a large land base it could exploit. In addition with an attractive yield  investors were being well paid to be patient. In retrospect buyers and holders were well rewarded especially if they sold at the right time.

The second time I looked under the hood at PWT was in July of 2011.It was suggested that it would be worth putting the stock on a watch list for the right signals to line up for a buy. That happened in October of 2011.

Let’s investigate the current status of the shares and how best to proceed.

The three year chart depicts the advance that started in September of 2009 at $14.00 and ran to a high of $28.20 on February 28, 2011. Also evident is the golden cross that formed in September of 2009 signalling that the game was afoot!

Unfortunately after the peak a double top surfaced which signalled a reversal of the uptrend. By June of 2011 a death cross appeared confirming that there was more selling to come. The shares then broke support at $22.00 and ran to the October 04, 2011 low of $13.22. The shares have moved off the lows and are now holding support along the 50 day moving average.

The MACD and the RSI on the six month chart  both signalled a buy in October and are again suggesting that PWT has more in the tank. There is resistance at $19.00 that has to be overcome but after that its fairly clear run to $21.00.

Its hard to advise someone to sell a stock they bought in 1999 at what looks like a decade long low.What I can tell from the long term charts you must have been buying at about $5.00 a share back then. If you were to sell  at today’s prices you would still have a hefty capital gain and would have to  pay tax on it.

Another factor to keep in mind is the yield on your orignal investment. The annual dividend assuming you paid close to $5.00 a share  in 1999 is producing a yield over 20%.  It will be hard to find that kind of return with a similar risk profile. Given your specific situation I think that PWT is a hold not a sell.

Make it a profitable day and happy capitalism!