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The Telus Sky tower slated for Calgary.
The Telus Sky tower slated for Calgary.

Schizas’ Mailbag

Dundee REIT is building a base Add to ...

Hey Lou,

I was hoping I could get your thoughts on D.UN-T.

Thanks,

Cody

Hey Cody,

This will be the second time that I conduct a study on the units of Dundee REIT.

I last undertook an investigation on a request from AL on May 11, 2012 when the units were trading for $37.86. Al had purchased his units at $29.00 and was thinking that they had gotten ahead of themselves and were due for a pullback. The research conducted on his behalf indicated that the advance still had more in it with a couple of provisos.

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The first was to watch for overhead resistance at $40.00 and the second to trust his instincts. I have found that when an investor is questioning if they should continue to hold a stock after generating a healthy return it indicates that they want to sell. My advice in those circumstances is to sell and get to a place where you are not being distracted by the fear of loss. You can always buy back in once you have better visibility as to the strength or weakness of an advance.

Another review of the patterns evident on the charts will inform my evaluation of D.UN.

The three-year chart indicates that although the units did pull back in May of 2012 they caught a bounce off support along the 50-day moving average and made their way to $39.29 on July 25, 2012. From there the units retreated to support at $32.00 and again bounced to the 52-week high of $39.30 on Jan. 28, 2013. However that was the end of the ride as selling pressure gave rise to a retreat that took the units to a 52-week low of 28.71 on Aug. 22, 2013.

Worth mentioning is the double top that formed in late January and early February of 2013. A double top is a reversal pattern that investors need to understand in an effort to preserve capital. There is also a death cross that surfaced in late May of 2013 when the units were breaking below support at $35.00.

The six-month chart depicts the sell signals generated by the MACD and the RSI in May and the formation of the death cross later in the month. There is also an established downtrend line that has been providing resistance for the last four months. At this point D.UN is trying to build a base at $29.00 which it may have to undertake for a while longer. With a yield on distributions of 7.642 per cent, the units are sure to gain some attention and help extend the base.

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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