This is the fourth article in a series about a 1700 Kilometre (over 1000 miles) road trip that I did a week ago. You can follow these links to the first three articles.
Canadian Transportation Companies Start My Tour
Canadian Forestry Companies Under Review
Canadian Pipeline Companies Under The Microscope
Continuing with one of Canada's largest pipeline companies, TransCanada Pipelines (TRP.TO, TRP) has been rocketing higher. Here is a link to their latest investor presentation. They are primarily a Natural Gas transportation company.
The SCTR is holding nicely above 80 and has been really strong since the beginning of the years. We can see the price has soared to new highs and is currently 25% above the 40 WMA. I have shown an area on the left side marked with a red arrow that made a top on TRP.TO. Notice how the volume peaks matched the top and bottom of the stock range. What makes that worrisome is the third highest volume candle on the chart was last week. Perhaps it marks another top?
Next, I have included the Enbridge Income Fund (ENF.TO). They have a smaller network that spins out cash as a yield play. Network Map. This chart looks a lot like the Enbridge chart I posted in the first pipeline article on Monday. The SCTR is rolling over below 75 and the price is testing the 10 WMA. The price is still working higher and the yellow trend line is currently below the price action. The last two weeks have seen a little higher volume and the first down week in price after nine up weeks. Red line resistance sits around $33.50. The recent high was almost exactly 50% of the move down.
Veresen (VSN.TO) is a smaller company with a network carrying Natural Gas and Natural Gas Liquids out of the Northwest corner side of Alberta to southern markets. Click here for the Network map. This stock still has an SCTR at 81 which is nice and strong. The yield is excellent at 9 % which can help support the stock. We can see the 10 WMA has been resistance throughout the downturn and has provided support throughout the rising market. It is not always as clear as it is on this chart, but this is bullish. The MACD is slowing a bit but is still very positive.
Valener (VNR.TO) is a gas distribution company in Quebec, but it is also a provider of electricity. Here is a link to their network map. This is not a network harvesting Natural Gas production to put it in the main lines. This is a distribution network across Quebec. This makes it more like a utility. The chart does not match the rest of the gathering pipelines shown so far.
The SCTR has just fallen out of being a top performer above 75. That just started after Brexit. Price has pulled back to the orange support line. I would suggest this will probably go sideways as it still offers a significant yield, but it might have put in the highs for now. This looks pretty extended on the big picture so a consolidation would be very normal.
In summary, the route through the area North and West of Edmonton crossed 7 of these companies pipeline infrastructures out of 8. Northern Gateway is an oil pipeline trying to push to the west coast and two Natural gas proposals to go to Kitimat BC are trying to get products to the coast. The stock charts seem unaffected by the regulatory drag with the exception of Enbridge and the Enbridge Income Fund for the Northern Gateway pipeline. TransCanada stock price seems exceptional with the continued resistance on Keystone XL. We all know the fate of Keystone and the hurdles for that project. TransCanada has also proposed an Energy East pipeline. That one only has 680 groups that want to speak against the project. All of these proposals are in regulatory stagnation.
Recently, one of the Kitimat Natural Gas proposals has been stalled on a final investment decision. I am not sure of the status of the other one. Based on the existing hub of activity in Northern BC and Alberta, there is lots of long term potential if some of this product can reach foreign soil.
While all of these stocks have bounced off the lows, they continue to try to gain an inch of growth by proposing smaller initiatives. I think what surprises me is how these stocks continue to perform on both yield and price.
I'll continue the review of more industry groups later on in the week. I'll also cover this off on the webinars over the next few weeks as well. The Commodities Countdown Webinar 2016-07-21 is the next one, so I hope you can join me. Click on the link to register. If not, you can check the webinar archives found here. StockCharts Webinar archives. You can also follow me on twitter @Schnellinvestor and LinkedIn. If you would like to receive the rest of this series in your email, please click on the subscribe button below.
Good trading,
Greg Schnell, CMT, MFTA.
