HSE Husky Energy.

See our previous blog on August 26. In today’ Toronto Star,  Bill Carrigan an independent stock-market analyst, mentioned the stock as a buy in an article that was primarily about the use of stop-loss orders. I did not find the article very “actionable” as it left me with the feeling so now what. So here is my take on the matter.

HSE feb 2011 hse feb 20112

Here is the big chart , and the intermediate chart picture. I have inserted a count in both, but am not entirely convinced that either is perfectly correct, but we are not trying to be perfect, just very , very , plausible. Since last August things have worked out well, if slowly, but you are picking up a 4+% dividend along the way. In the mean time we have managed to break out of the “wedge” formation that we were in for a couple of years.  Here is a little more detail;

hse 2011 3

The break-out is clear enough, it is not too late to buy as it could have quite a way to go, so buy at the market but put in a stop-loss at about $26.50 (with a limit of $25). You do not want to see the stock re-enter the wedge represented by the downward sloping line over the tops of the wedge. You will be risking about $2 initially. If and when the stock moves up, you ratchet up the stop-loss but just like driving a car, don’t go bumper to bumper. Simple adjust to the purchase price and wait for things to go your way, the trend, after all is your friend and most of us are our own worst enemies!

So where do you sell, at $36 or a little lower. Doing that would net you about 33% plus one year carry at 4+% for a total of 37%. Along the way, of course , there is no harm in reformulating your strategy but remember that if you always make 40% you should do just fine. If you get  “married” to a stock you will inevitable lose money.

Just to see how plausible this trade is , a look at West Texas is worthwhile.

wtic hse

We do not like oil (for the moment, and perhaps longer than that, see elsewhere in this blog) so why like Husky. well, quite clearly HSE has been completely impervious to the price of oil, for the past two years was up and HSE down. This stock listens to a different drummer so this is not a great concern, for now. The discrepancy may have something to do with the ownership structure of the stock, which is fairly unique. By the way, there are a number of counts on this stock that are much more bullish than these.

You can click on these charts to enlarge them and move them around.