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Hi Lou,

I enjoy your column and learning more about investments. I own Whitecap Resources and Freehold Royalties and wondered where you see them going as per their fundamentals. Not sure if I should sell or wait.

Thanks very much,

Marni

PS I realize you can evaluate only one at a time, but hoping there is enough interest to consider evaluating both of these some time soon

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Hey Marni,

Thanks for the assignment! Glad to see that you are pleased with my work and that you are adding to your investment knowledge. I have in the past examined more than one stock and will do so on your behalf. I will undertake a technical analysis of Whitecap Resources Inc. (WCP TSX) today and Freehold Royalties Ltd. (FRU TSX) next time. Unfortunately I will not be able to provide you with a fundamental analysis of these stocks.

This will be the second time that I investigate the patterns on the charts for WCP. The last time was on February 4, 2013 when the shares were trading for $9.36 and the dividend produced a yield of 6.41%. Liz wanted my perspective on the stock and the research indicated that the stock needed to break above $9.50. It was noted that the evidence pointed to a stock that had more gas in the tank.

In retrospect that was the right call. By August of 2014 WCP had reached a high of $18.48. Unfortunately at that point the price of oil had begun a retreat taking the stock lower.

Another audit of the charts will help you with your decisions.

Desktop users click on image to enlarge

The three-year chart indicates that the advance that started in late 2012 came to an end by August, 2014 when the stock breached the uptrend line. In September of 2014 the shares broke below the 50-day moving average and by October they fell through support along the 200-day moving average.

In early January of 2015 WCP caught a bounce off of $9.50,with some help from a recovery in the price of oil, and ran to $15.00 by April. Once again a decline in the price of oil pulled the shares lower.

Desktop users click on image to enlarge

The six-month chart illustrates the resistance along the downtrend line and the moving averages. The MACD and the RSI generated sell signals in April as the stock hit $15.00. The momentum indicators signalled a buy in July for a run to $12.00 where the stock met resistance along the 50-day moving average.

The dividend yield of 6.9% is quite healthy, which might justify continuing to hold the stock, but there is little to suggest that we can expect a trend reversal in the near term. If you are so inclined these shares have offered many profitable trading opportunities over the last year.

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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