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Pembina investors riding a pipeline to profit

Hi Lou,

Has Pembina Pipelines anything left on the upside?

Thank you,

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Don

Hey Don,

Thanks for the assignment.

This will be the third time that I review the case for Pembina Pipeline Corporation. The last time was on Feb. 11, 2013, when the shares were trading for $29.50. Glenn wanted an opinion on the stock as a buy and hold candidate. The analysis conducted at that time indicated that there was resistance near $30.00 and the MACD was signalling a pullback. It was advised to take profits and get back in at a lower price. The shares did retreat just over 2 per cent to $28.89 by Feb. 26, 2013, but that was the end of the selling. The shares broke above resistance and started a new advance to $34.00 before retesting support at $30.00 in late June of 2013.

Another examination of the charts will help identify if we can expect more from PPL.

The three-year chart outlines the base building that formed just below resistance at $32.00. By September of last year the shares had broken through $32.00 and spent the next three months bumping up against resistance at $34.00. By mid December the shares broke through $34.00 and within 120 days added another 20.50 per cent to the value of the stock.

The six-month chart highlights the buy signal generated by the MACD and the RSI in December and the gap up in late March as the stock was added to the S&P TSX 60. The shares are currently overbought, meeting resistance at $42.00 and offering a dividend yield of 4.02 per cent.

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At this point in time there are a number of factors pointing to a continuation of the uptrend. The stock has built support at various prices throughout the advance and has enjoyed support along the 50-day moving average. We might expect a retest of support along the trend line but that doesn't imply a serious retreat. Another thing to keep in mind is that the PPL and its peers have attracted the attention of money managers looking to profit from increased production of oil and gas driving demand for gathering systems and processing facilities.

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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