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Looking to profit from oil sands plays? Look beyond Cenovus

Special to The Globe and Mail

Expansion work at Cenovus's Christina Lake operations in northern Alberta. (CENOVUS ENERGY INC.)

Hi Lou,

Interested in your thoughts on where Cenovus Energy is headed in 2014/2015.

Nick

Hey Nick,

Thanks for the assignment. This will be the first time that I explore what Cenovus Energy Inc.(CVE-TSX) has to offer. Cenovus was created in 2009 when Encana Corp. split its assets leaving Cenovus with interest in two producing oil sands projects, heavy oil assets in Alberta and Saskatchewan, and a stake in two refineries in the United States. The stock has been labouring under a downtrend since February, 2012 when it was trading at just over $37. The dividend currently yields 3.28 per cent with average daily volume over the last three months of 1.3-million shares.

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A review of the charts will provide some insight into the trend, support and resistance for Cenovus.

The three-year chart provides an outline of the downtrend that has been dominant over the last two years. There have been lots of opportunities to trade Cenovus for profit since 2012. The MACD and the RSI signalled a buy in August, 2012 at $29 and a sell by September near $35. The momentum indicators flashed another buy in April, 2013 with a sell notification in July. Clearly, the relatively short duration of the moves demanded vigilance for optimum outcomes.

One of the operating issues related to the company is centred on their Foster Creek steam-assisted gravity drainage project. Some analysts have questioned the steam-to-oil ratio suggesting its taking more energy to produce from the reservoir which has bottom line implications.

The six-month chart sketches a range bound pattern with support at $29.75 and resistance at $31 through which the shares have oscillated three times since August producing a 9-per-cent gain bottom-to-top on each turn. Currently the stock is testing support at $29.50 and may have to retest the August low near $28.75. At this time I am not seeing a compelling case to immediately jump on this stock unless it’s to trade it for profit as opportunities arise.

There is an established downtrend with no sign of a trend reversal about to emerge and the momentum indicators are neutral. From the research conducted on your behalf you might be best served conducting a competitive analysis of other oil sands players which might be better-positioned.

Make it a profitable day and happy capitalism!

 

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Companies & investments Mentioned In This Article (1)

Company Price Change Volume
Cenovus Energy
CVE-T
33.08 0.091 % 607,473

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