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SCHIZAS’ MAILBAG

Is it time to buy Twin Butte Energy? Add to ...

Hi Lou: Would you please give your comments on Twin Butte Energy. It had a couple of strong selloffs. Thanks, John

Thanks for the assignment. This will be the second time I investigate the opportunities and risks associated with Twin Butte Energy Ltd. The first study was conducted on Aug. 22, 2012, when the shares were trading for $2.61. Peter wanted to know my thoughts on the company and the research conducted on his behalf uncovered the trading pattern that dominated the chart.

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The shares were trading in a range-bound pattern with resistance at $2.70 and support at $2.40. It was advised to expect a pullback and a retest of support but not a breach. Retrospectively, that was the right call. The stock retreated to support and then caught a bounce to a 52-week high of $3.02 on Oct. 17, 2012. But that was all TBE had to give. By November, 2012, the shares began a sustained retreat into the second half of 2013.

Another examination of the charts will inform my comments on how best to proceed.

The three-year chart indicates a downtrend has been in place since early November, 2012, generating a series of lower highs and lower lows along the way. The shares breached support at $2.40 in February, 2013, and is now meeting resistance at that price. The gap down in mid July, 2013, was triggered by reduced production guidance followed by a series of cuts to target prices by analysts that follow the stock. Those news releases gave rise to panic selling that made it almost impossible to avoid getting swept out to a sea of losses.

The six-month chart isn’t offering a lot of signals that buyers are ready to retake control of the market. The MACD and the RSI are indicating that investors should expect continued selling. Notice the resistance along the 200-day moving average that the stock has not been able to overcome. At this time, the best course is to stay on the sidelines until there is some evidence that the selling pressure has exhausted itself. The dividend yield of 11.82 per cent is like the Sirens of Titan beware its call.

Make it a profitable day and happy capitalism.

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