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AvenEx Energy in consolidation mode Add to ...

Hello Lou,

I would like your comments and investigation on AvenEx Energy. It's a little followed stock in the O/G field, a small growing producer, with perhaps too large a 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. 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 per cent 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 per cent 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!



Have your own question for Lou? Send it in to lschizas@globeandmail.com.

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