Hi Lou,
Love hearing you on AM640, especially your insights. Keep 'em coming!
Wanted to get your feedback and your thoughts on ENF (Enbridge Income Fund Holdings). It had a pullback due to the TSX retreating with oil and commodities. I wanted to add some into my TFSA, as I probably won't withdraw that cash for the next five years at least and might as well put that cash to work. Look forward to your analysis!
Thanks, Rick
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Hey Rick,
Thanks for the assignment and your kind words. I'm glad to hear you are finding value from my work with AM640. This will be the second time that I inspect the charts for Enbridge Income Fund Holdings Inc. (ENF-T). The last analysis was conducted on Sept. 16, 2015, when ENF was trading for $31.48 and offered 5.3-per-cent dividend yield. Mike had bought shares near the high of $44.93 and wanted to know what he missed in his decision making process.
The workup indicated that Mike had discounted the consequences of Saudi Arabia declaring war on non-OPEC producers. The Kingdom had tired of losing market share and decided to bleed the competition by maintaining production levels. The excess supply has crushed the price of oil to current levels and has some analysts calling for $18 barrels. Yikes! ENF, along with every service provider in the sector, has suffered right along with Canadian producers.
It was advised that there was scant evidence that investors could expect a trend reversal. In retrospect, that is what has transpired. Another probe of the charts will help you decide how best to approach this investment.
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The three-year chart illustrates the downtrend that has been in place since February of 2015 and the death cross that surfaced in July. Also worth mentioning is the resistance along the 50- and 200-day moving averages over the last 10 months. ENF did catch a bounce off support near $26 in December, but the move up hardly made up for the retreat from the highs. Lower highs and lower lows are generally not a good reason to go long.
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The six-month chart provides a close up of the sell signals generated by the MACD and the RSI in October as ENF traded near $35.00. The dividend yield of 6.66% may seem attractive, but, until the downtrend is broken, you should be cautious. Finding new lows with your money is no way to start the new year.
Next time I will examine the case for Pengrowth Energy Corp. (PGF-T) on a request from Dave. Make it a profitable day and happy capitalism!