Go to the Globe and Mail homepage

Jump to main navigationJump to main content

Bright natural gas flares dot the North Dakota landscape amid an oil boom that is changing the energy dynamics of North America. (Nathan VanderKlippe/The Globe and Mail)
Bright natural gas flares dot the North Dakota landscape amid an oil boom that is changing the energy dynamics of North America. (Nathan VanderKlippe/The Globe and Mail)

Schizas’ Mailbag

Scoop Pengrowth when buyers take control of the market Add to ...

Hey Lou,

Whats your take on Pengrowth?

Thanks,

Nick

Hey Nick,

Thanks for the assignment.

This will be the fourth time since June of 2012 that I have examined the case for Pengrowth Energy Corp. The second time an investigation was conducted was in November of 2012 when the shares were trading at $5.53. John wanted to know if the stock had hit bottom. The research done on his behalf indicated that PGF would most likely have to retest the 1992 lows at $4.50 and that it would be prudent to wait for a trend reversal.

More Related to this Story

The last analysis was posted on Jan. 30, 2013, on behalf of Doug who could not believe how the stock continued to go down. The shares were trading at $4.44 having broken below support at $4.50 and the MACD and RSI were indicating that momentum was favouring sellers. Unfortunately the selling continued unabated until late February where the shares caught a bounce off of a 52 –week low of $3.93.

The move off of $3.93 came as natural gas prices caught a lift and the company reported a 55 per cent increase in their proven and probable reserves. Another run at the charts will better inform my comments on the stock.

The three-year chart illustrates the long decline to the 52-week low of $3.93 on Feb. 26, 2013, where the stock caught a bounce to $5.75. The advance met resistance along the 200-day moving average and proceeded to pulled back. The silver lining in this dark cloud is that at least the relentless selling has abated. It is not yet clear that a new sustained uptrend has started, but hope springs eternal in the heart of investors.

The six-month chart indicates that the RSI and MACD both signalled a buy off the February lows and then a sell as the shares hit resistance along the 200-day moving average in mid March. If you had caught the ride bottom to top you would have realized a 46.3 per cent capital gain in just over two weeks. Currently the momentum indicators are still suggesting continued selling pressure.

The best approach to take with PGF is to watch for support at $5.00 and a shift in the MACD and RSI indicating the buyers have taken control of the market. I like the improved price of natural gas and the increased reserves reported by the company. The 9.09 per cent dividend yield is also attractive but being pretty just isn’t enough!

Make it profitable day and happy capitalism!

Have your own question for Lou? Send it in to lschizas@globeandmail.com.

In the know

Most popular videos »

Highlights

More from The Globe and Mail

Most popular