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Schizas' Mailbag

Canadian Oil Sands may retest $19 Add to ...

Hey Lou,

I read your articles whenever I see them. I still do not fully understand some of the more complicated aspects of technical analysis, but I do find the articles interesting.

I would appreciate your analysis of Canadian Oil Sands. I have been a shareholder over the last year. With cost averaging, my average price is somewhere around 22 dollars. The dividend yield is nice, and as far as I understand, they produce light crude, so the Canadian Heavy Crude discount which applies to many oil sands players does not affect them to the same degree. It pulled back recently and I was considering adding to my position.

I wanted to know, would this be a time to add? Time to sell? Time to hold?

Thanks for the help!


Halifax, NS

Hey Mark,

Thanks for the assignment. Trust me when I say that I use the basics of trend, support, and resistance when it comes to technical analysis. If you can add these tools to your work you will have made great progress in reducing risk and increasing your opportunities.

I last took a run at the charts for Canadian Oil Sands Ltd. on June 16, 2010 on a request from Irene. At the time the company was still operating as a trust but was expected to convert to a corporation by the end of that year. The analysis indicated that the units were range bound between support at $27.50 and resistance at $29.00. It was noted that if there was a break out of the range it could run to $32.00 on the upside and down to $22.50 on selling pressure.

Another examination of the charts will help provide some guidance on your investment.

The three-year chart depicts the break in the fall of 2010 that established a new trading range between support at $23.00 and resistance at $26.00. The stock started an advance in December of 2010 bouncing off of $23.00 and running to a high of $32.00 by May of 2011. But that was it. From there until the fall of 2011 the stock was under selling pressure that took the price all the way down to $19.00. You can see the double bottom that surfaced by late November that signaled a reversal of the selling and the start of a new advance.

The MACD on the six-month chart generated a buy signal in late November that in conjunction with the double bottom suggested that a move to the upside was developing. By late January of 2012 the MACD indicated that it was time to take profits at $24.50. Since then the shares have been in decline.

There seems to be an attempt to find support at $21.50 but with what appears to be a descending triangle forming it would be best to be prepared for a retest of the $19.00 lows. If you are looking to add to your position, wait for a pull back. It seems that you are happy with the dividend and have gotten used to the swings that have become the new normal for COS.

I don’t see a new advance forming at the moment.

Make it a profitable day and happy capitalism!

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