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Schizas’ Mailbag

Good charts, stable dividend make this energy producer a buy Add to ...

Hi Lou,

Could you analyze Twin Butte Energy please? Is the dividend sustainable?

Thank you!

Grant

Hey Grant,

Thanks for the assignment.

This will be the third time that I examine the situation at Twin Butte Energy Ltd. The last was on July 31, 2013, when the shares were trading for $1.62. John asked for my comments after a couple of strong selloffs. The stock was in the grips of a retreat that started in November of 2012 and there weren’t any signals that the selling pressure had exhausted itself. It was advised to stay on the sidelines until there was greater visibility that buyers were willing to hit their buy buttons.

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Another inspection of the charts will get us up to date with how TBE is progressing.

The three-year chart demonstrates the double bottom that formed in August of 2013 indicating that a trend reversal was forthcoming. A new uptrend took the stock to $2.40 by January of 2014 but it has since pulled back. A golden cross surfaced in November of 2013 with the shares enjoying support along the 50-day moving average.

The six-month chart illustrates the uptrend line and the 50-day moving average that have provided support since November of 2013. What is also evident is that the uptrend has been gentle and that a range has been established with oscillation between resistance and support. An inspection of the MACD and the RSI in late October of 2013 depicts the pullback from $2.30 as the momentum indicators generated sell signals. However, note that the stock only retreated to support along the uptrend line and the 50-day moving average.

The next step higher to $2.40 also met resistance as the MACD and the RSI indicated that profit taking was to be expected. Once again the shares found support along the uptrend line. What seems to be developing is a series of higher highs and higher lows which is always a welcome development.

The research conducted on your behalf has unearthed a number of comments on stockchase.com that seem to support the opinion that the 8.38 per cent dividend is safe. At this point in time the patterns on the charts support a buy.

Make it a profitable day and happy capitalism!

Have your own question for Lou? Send it in to lou@happycapitalism.com.

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