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Pembina's operations include more than 8,500 km of pipeline. (Pembina Pipeline Corporation)
Pembina's operations include more than 8,500 km of pipeline. (Pembina Pipeline Corporation)

Schizas’ Mailbag

Time to sell Pembina Pipeline shares Add to ...

Hi Lou,

I wonder if I might interest you in revisiting Pembina Pipeline for an opinion on the buy and hold side.

Glenn

Hey Glenn,

Thanks for the assignment.

This will be the second time that I conduct an investigation on the potential outcomes for Pembina Pipeline Corp. The last time was on Oct. 14, 2011, when it was trading in a range with support at $24.50 and resistance at $25.50. Andrew wanted some guidance as how best to proceed given that the stock made up 25 per cent of his retirement portfolio. It was advised that the dividend yield of 6.1 per cent more than compensated for the sideways trading pattern that had developed in July of 2011.

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It turned out that it was the right call. The stock broke out of its range and ran to $30.00 a share by December of 2011. The trading pattern in 2012 would best be described as a series of pullbacks and advances with resistance at $30.00.

Another run at the charts will provide greater insight as how best to proceed with this investment.

The three-year chart outlines the pullback in January of 2012 to $25.50 followed by the advance to the 52 week high of $30.80 on May 18 where a double top signalled another pullback to the 52-week low of $24.86 in June. The advance that started off the June lows has added 15 per cent to the share price in eight months. At this time the MACD is signalling a pullback as the shares approach the resistance that has formed at $30.00.

The six-month chart depicts the signals generated by the MACD and RSI indicate that the shares of PPL are struggling with resistance at $29.50. There also appears to be a descending triangle forming which suggests a downside breakout. The company will report first-quarter 2012 in March which you should put on your calendar. Quarterly reports are significant milestones that affect the trading value of a stock for better or worse depending on performance.

I wouldn’t be a buyer or a holder at this point. Given how the stock has traded over the last year you probably want to take a profit and get back in at lower prices.

Make it a profitable day and happy capitalism!

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

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