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Pipelines feed crude oil into in the tank farm at the Enbridge Pipelines oil terminal facility in Hardisty, Alta. Enbridge, Inc. ownes 72 per cent of Enbridge Income Fund Holdings, Inc. (Larry MacDougal/The Canadian Press/Larry MacDougal/The Canadian Press)
Pipelines feed crude oil into in the tank farm at the Enbridge Pipelines oil terminal facility in Hardisty, Alta. Enbridge, Inc. ownes 72 per cent of Enbridge Income Fund Holdings, Inc. (Larry MacDougal/The Canadian Press/Larry MacDougal/The Canadian Press)

Schizas' Mailbag

Enbridge a good buy at these levels Add to ...

What do you think the chances are that the Gateway project will go through, and if it does, what impact will it have on Enbridge shares?



Bruce



Hi Bruce,



Enbridge Inc. is a major player in the transportation of energy in Canada and the United States. The proposed Northern Gateway Pipeline Project that will move bitumen from Alberta to Kitimat, British Columbia for export to markets in Asia has a number of issues that need to be addressed if it is going to get a green light.

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The company has to satisfy the needs of native communities if it hopes to gain a right of way across tribal lands. There are also environmental concerns. The pipeline will have to cross two spawning grounds for sockeye salmon and the fear of a potential oil spill will be another factor considered during the review process. The company plans to have their native and public consultations completed by the end of 2011 and wrap up the government review process by the end of 2012. Construction is forecast to begin in 2013 and be completed by 2016.



In summary, we have a project that will cost an estimated $4.5-billion and take another four years and a bit before one molecule of bitumen is shipped. That of course depends on every single thing going exactly according to plan. From my point of view, it is too far into the future to be a factor in a decision today. If all goes well and the project comes on stream, it's a bonus.

Let's examine the charts for some indication of trend, support, and resistance.





The three-year chart tells the tale of a strong advance off the 2009 lows at $17.00, with the move up confirmed by the golden cross that surfaced in June of that year. The advance has had good support along the uptrend line and the 50-day moving average. The stock did catch a breather in May of 2011 at $32.50. It also got caught up in the August 2011 selling panic that come in as the U.S. government dithered with the debt ceiling issue and Standard And Poor’s cut the U.S. debt rating.





The six-month chart illustrates the buying that came in at $28.50 in early August as investors grabbed the stock at a discount as the debt ceiling debacle subsided. The MACD and RSI generated signals that the shares had been oversold and investors who use technical analysis took advantage of the opportunity.



Of note is that on the bounce off $28.50 the stock once again met resistance at $32.50. The next time ENB is scheduled to report its quarterly results is on Nov. 3, 2011. A healthy beat of the the estimates could provide the upside needed to break above resistance and get the stock moving higher.



In summary, I would not buy ENB simply on the anticipation of the contributions of the Northern Gateway Pipeline. But with a 3 per cent dividend yield, a strong uptrend providing support, and a golden cross on the chart, it looks like a good buy at these levels.



Make it a profitable day and happy capitalism!

 

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