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Pump jacks pump oil near Standard, Alberta, May 12, 2014. (Todd Korol For The Globe and Mail)
Pump jacks pump oil near Standard, Alberta, May 12, 2014. (Todd Korol For The Globe and Mail)

SCHIZAS’S MAILBAG

Veresen is not a buy despite a nearly 14% dividend yield Add to ...

Today I will explore the factors surrounding Veresen Inc. (VSN-T) to conclude the assignment from Angelo. This will be third time since 2012 that I analyze this stock.

The last time was on May 3, 2013. The shares were trading for $13.37 and Manuel wanted some updated information. The research indicated that the stock had bounced off a 52-week low at $11.22 as the moving average convergence divergence (MACD) and the relative strength index (RSI) generated buy signals. There was a golden cross in place and the momentum indicators were pointing to a continuation of the advance.

There was sufficient evidence in place to support a buy, and it was advised that VSN was an example of buying high and selling higher. In retrospect, that was the right call. The stock ran to over $17 by June of 2014; however, that was the end of a profitable run.

Another inspection of the charts will provide a technical dimension to the evaluation of this stock.

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The three-year chart illustrates the decline that started in May of 2015 as the shares came off a 52-week high of $19.40. In April, the MACD and the RSI generated sell signals as the stock had become overbought. A death cross formed in late July of 2015 as the shares breached support near $14. What has transpired since then has been a continuing series of lower highs and lower lows. Also visible on the chart is the established downtrend and resistance along the 50-day moving average.

Desktop users click on image to enlarge

The six-month chart provides a close-up of the decline and the resistance along the 50-day moving average. Sadly, there is a dearth of evidence to support a buy at this time. What surfaced in my research is that VSN is up to their eyeballs in their Jordan Cove LNG Terminal project. There are still lots of things that have to happen to make the project a success, so it would be prudent to regularly monitor how things are progressing.

Next time I will audit the case for Groupon Inc. (GPRN-Q) for JV.

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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Follow on Twitter: @louschizas

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