Contact Energy - CEN Chart

[Phaedrus]

Here is an updated CEN chart along with 5 fairly active indicators that I consider suitable for monitoring the current uptrend. While CEN is currently looking good, this is no time to blindly "buy and hold" ANY stock.

Note how price action accelerated away from trendline (1) rendering it obsolete. Ditto trendline (2). Trendline (3), although confirmed, now looks to be too steep to sustain. In the absence of other signals, any break below this trendline should probably be ignored unless you really want out.

The RSI(24) oscillator has today become technically "OverBought", and will trigger a "Sell" signal when it drops below the OverBought threshold. Unless this signal is confirmed by some other indicator(s) it should be ignored. This oscillator can be "detuned" to some extent by using a break of its trendline as the trigger, rather than a break below the overbought threshold. With uptrending stocks, it is quite common for oscillators like the RSI to remain around overbought levels for long periods of time and to give a string of "Sell" signals. Any RSI "Buy" signals will mark good entry points, though. You can see here that the RSI signalled a "Buy" over a month ahead of most other indicators featured here. Even the OBV trendline break confirmation didn't come till more than a week later.

[Snoopy]

While CEN is currently looking good, this is no time to blindly "buy and hold" ANY stock.

I'll let Phaedrus tell the chart story, but I wanted to agree with his statement above - for fundamentalist reasons.

Today's interest in Contact is a flow on from speculation of what might happen if the BG Group takeover offer for Contact cornerstone shareholder Origin Energy is successful. BG Group I believe used to be 'British Gas'. Having BGG as the new cornerstone shareholder in a New Zealand energy generator doesn't seem a particularly long term good fit. IF BGG wants to sell Contact Energy the transfer of that 51% majority Contact stake will trigger the New Zealand takeovers code. The possibility of this is why the CEN share price has risen today.

Fundamentalists who follow Contact will know that even before today's price rise, Contact Energy was looking expensive. It is a leap of faith to suggest that in today's funding market, that there are a battery of potential suitors lining up to buy Contact for 'top dollar'. It is possible that BGG would only be able to sell such a large shareholding at 'market prices' and that a takeover offer might be made at say $9.50, or even at a discount (say $9) . That is a level that might be fair - but insufficient to convince the NZ institutions to sell. Thus any such takeover offer would fail (perhaps even by design) and the CEN share price might have considerable sort term downside as a consequence.

BG Group already has interests in a Queensland gas field coming on stream in 2010. It is highly likely that they will be targeting Asian markets with this gas and they see Origin as a natural local synergy partner. If they do decide to divert gas to Asia, this may hurt Contact's own gas powered generating stations in a negative way. Thus it is far from clear to me that this Origin Energy takeover deal is good for Contact Energy shareholders.

SNOOPY

discl: hold CEN

[redzone]

I cant see BGG wanting Contact....flick it back to Helen or even the Chinese

[Viking]

I'll let Phaedrus tell the chart story, but I wanted to agree with his statement above - for fundamentalist reasons.

Today's interest in Contact is a flow on from speculation of what might happen if the BG Group takeover offer for Contact cornerstone shareholder Origin Energy is successful. BG Group I believe used to be 'British Gas'. Having BGG as the new cornerstone shareholder in a New Zealand energy generator doesn't seem a particularly long term good fit. IF BGG wants to sell Contact Energy the transfer of that 51% majority Contact stake will trigger the New Zealand takeovers code. The possibility of this is why the CEN share price has risen today.

Fundamentalists who follow Contact will know that even before today's price rise, Contact Energy was looking expensive. It is a leap of faith to suggest that in today's funding market, that there are a battery of potential suitors lining up to buy Contact for 'top dollar'. It is possible that BGG would only be able to sell such a large shareholding at 'market prices' and that a takeover offer might be made at say $9.50, or even at a discount (say $9) . That is a level that might be fair - but insufficient to convince the NZ institutions to sell. Thus any such takeover offer would fail (perhaps even by design) and the CEN share price might have considerable sort term downside as a consequence.

BG Group already has interests in a Queensland gas field coming on stream in 2010. It is highly likely that they will be targeting Asian markets with this gas and they see Origin as a natural local synergy partner. If they do decide to divert gas to Asia, this may hurt Contact's own gas powered generating stations in a negative way. Thus it is far from clear to me that this Origin Energy takeover deal is good for Contact Energy shareholders.

SNOOPY

discl: hold CEN

By saying that Snoopy, does that also spell the possibility that BG will off-load their 51% of Contact? Because it feels (or sounded) like that Contact does not particularly suit BG aim in this take-over.

[Snoopy]

By saying that Snoopy, does that also spell the possibility that BG will off-load their 51% of Contact? Because it feels (or sounded) like that Contact does not particularly suit BG aim in this take-over.

Yes, BG might unload their stake in CEN although I thought I covered what might happen in that eventuality.

"It is a leap of faith to suggest that in today's funding market, that there are a battery of potential suitors lining up to buy Contact for 'top dollar'. It is possible that BGG would only be able to sell such a large shareholding at 'market prices' and that a takeover offer might be made at say $9.50, or even at a discount (say $9) . That is a level that might be fair - but insufficient to convince the NZ institutions to sell. Thus any such takeover offer would fail (perhaps even by design) and the CEN share price might have considerable sort term downside as a consequence."

If that doesn't cover it perhaps you might ask further about what point you wanted me to address.

Takeovers can take several forms. If BG just buys Origin outright and BG didn't own any shares in Contact before, I don't see why they would need to make a takeover bid for Contact. But then again I'm no expert in Australian takeover laws.

SNOOPY

[Viking]

Yes, BG might unload their stake in CEN although I thought I covered what might happen in that eventuality.

"It is a leap of faith to suggest that in today's funding market, that there are a battery of potential suitors lining up to buy Contact for 'top dollar'. It is possible that BGG would only be able to sell such a large shareholding at 'market prices' and that a takeover offer might be made at say $9.50, or even at a discount (say $9) . That is a level that might be fair - but insufficient to convince the NZ institutions to sell. Thus any such takeover offer would fail (perhaps even by design) and the CEN share price might have considerable sort term downside as a consequence."

If that doesn't cover it perhaps you might ask further about what point you wanted me to address.

Takeovers can take several forms. If BG just buys Origin outright and PG didn't own any shares in Contact before, I don't see why they would need to make a takeover bid for Contact. But then again I'm no expert in Australian takeover laws.

SNOOPY

Thank you for that Snoopy~ yes, that does cover what's on my mind~

well, I off-loaded mine earlier (a bit too early in hind-sight) could make roughly another 10% more~ but quite happy to take my profit and sit on the sideline watching things unfold

[Steve]

Can you imagine the level of political interference should Labour still be in power if 51% of CEN goes on the block?!

[minimoke]

Dang, I topped up yesterday at $9.10 on the back of falling lake levels. I hope today’s trading halt ends up being good news.

[Steve]

Dang, I topped up yesterday at $9.10 on the back of falling lake levels. I hope today’s trading halt ends up being good news.

I suspect that the news will flow thru in a positive way...

[minimoke]

I suspect that the news will flow thru in a positive way...

2% rise in price and a 2% drop in lakes - I'm happy!
Edit – lets make that 4.1% at end of day. I’m glad its election year and the government isn’t promoting energy savings!