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Hey Lou,

Any thoughts on Twin Butte Energy? High yield, high risk?

Joe

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Hey Joe,

Thanks for the assignment.

This will be the fourth time since August of 2012 that I investigate the details that surround Twin Butte Energy Ltd. The last analysis was administered on Feb. 24, 2014, on a request from Grant. The stock was trading for $2.29 and offered a dividend yield of 8.38 per cent. Grant wanted to know if the dividend was sustainable. The work carried out indicated that TBE was advancing in a gentle uptrend with support along the uptrend line and the 50-day moving average. The golden cross that surfaced in November of 2013 also added to the evaluation and resulted in a buy recommendation. In retrospect that was the right call. TBE hit a 52-week high of $2.50 in April of 2014 for a 9.17 per cent capital gain in two month.

Another assessment of the charts will provide greater depth to my thoughts.

The three-year chart indicates that the uptrend line hasn't been breached and support along the 50-day moving average has been maintained. What is also evident is that TBE is still producing higher highs and higher lows. In addition, the gentle up channel described in the February 2014 analysis is still in play despite the pullback from the 52-week high of $2.50. Currently, the stock offers a dividend yield of 8.17 per cent.

The six-month chart describes the retreat from the 52-week high in April. At the same time the MACD and the RSI both signalled that selling pressure was mounting which could see the stock retest support along the uptrend line and the 50-day moving average. The question at hand is does TBE have enough in it to punch through resistance at $2.50? The next flex point will come on the release of first-quarter results in May.

Your concern regarding the risk reward equation for this stock is valid. The sanctity of a dividend is always a concern but again a survey of comments by money mangers on Stockhouse.com seems to suggest that the dividend is secure at this time.

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At this juncture TBE is hold until we see if we get a bounce off the uptrend line and the 50-day moving average.

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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