During the past month, SIA has highlighted some compelling options for financial advisors seeking defensive, dividend paying equity positions within today’s volatile market environment. Today, let’s examine another defensive, dividend paying name in the Utilities Sector which has traditionally been regarded as a haven for stability and income; AltaGas Ltd (ALA.TO) is potentially materializing as a compelling option in this space.
AltaGas resides in the SIA Combined Canadian Dividend Report which is SIA’s most comprehensive dividend report combining the S&P/TSX Canadian Dividend Aristocrats Index, the S&P/TSX High Dividend Index and the Dow Jones Canada Select Dividend Index report together to give SIA’s subscribers the most in-depth choices of dividend names in the Canadian Market. Currently, ALA.TO resides in the Green Favored Zone at the 27th spot in the report showing consistent strength up the rankings as it has moved up 6 spots in the week, 1 spot in the last month and 4 spots in the last quarter. From a performance standpoint AltaGas has appreciated 3.48% in the last month and 6.40% in the last quarter. As well, the shares currently offer a reasonable 2.87% dividend yield. It entered the Favored Zone of the SIA Combined Cdn Dividend Report on August 2, 2023, at a price of $25.90 and never touched the Unfavored Zone throughout. As of yesterday’s close, the shares are at $43.95 representing a 69% increase since then.
In reviewing the candlestick chart for AltaGas Ltd, we see encouraging signs for the stock. The shares have maintained a steady, gradual uptrend with higher highs and higher lows since the beginning of Spring 2023. This follows a significant bear market across the entire Utility sector, driven by the rising interest rate environment from 2022 to 2023, which created broad pressure on utility names. For ALA.TO, the chart shows early signs of a reversal beginning in early 2023, which suggests improving sentiment and a potential shift in the longer-term trend. The shares found a bottom in November 2022 and again in March of 2023 at the $20 round number.
Since then, the steady pattern of higher highs and higher lows materialized, and the uptrend is still firmly in place today. What stands out as particularly encouraging is the most recent pullback. The shares dropped to around $40 in the first weekly candle of November but quickly rallied from this long lower tail and closed the week near $42.50. This move suggests that buyers stepped in aggressively at the $40.00 level, treating it as strong support and a fair value area for the stock. At the moment, the shares are attempting to form a higher high relative to the prior October peak at the $44.00 area. Only time will tell if the stock can show enough follow through strength to break above that level and continue its broader uptrend.
When reviewing the Point and Figure chart on a 2% scale, we can identify more precise support and resistance levels. The attached chart highlights five distinct phases in the pattern. The first phase is the two-year bull run from the spring of 2020 to the peak in the spring of 2022, when the shares reached a ceiling near the $27.00 area. This was followed by a bear trend that began as interest rates started rising in early 2022. The decline continued until the stock finally found a bottom in April 2023 at $19.56.
From that point, a new bull cycle developed. The shares broke above the March 2022 peak at $27.00, confirming that an uptrend was underway. The rising column of X’s lasted for 19 boxes as the price moved above that prior peak, which reflects strong conviction behind the reversal. In late 2024 the stock entered a brief consolidation phase as shares paused to digest the gains from this strong 19-box advance. The bulls reasserted themselves in March of this past year, confirming the continuation of the current uptrend.
We are now at another inflection point in the chart as the shares are attempting to make a higher high from its prior peak at $43.19 in September. If the shares can close above $44.05, this would complete another high and confirm the uptrend in still intact. If the shares do break above this near term $44.05 resistance level, next resistance above that is $47.58 based on a measured move. To the downside, support is at its 3-box reversal of $39.90 and, below that, the $35.43 to $36.14 area. The shares currently exhibit a bullish Double Top Pattern and has a positive SMAX score of 9 out of 10 which indicates strong near-term strength against the asset classes.
AltaGas Ltd operates a diversified portfolio of energy infrastructure businesses. These operations span four segments: Midstream, Power, Utilities, and Corporate. The Utilities segment owns and operates rate-regulated natural gas distribution assets across North America. The Midstream segment, following the sale of non-core Canadian assets, focuses on natural gas liquids processing, extraction, transportation, and storage, with gas sold to both commercial and industrial clients. The Power segment includes natural gas-fired, wind, biomass, and hydro generation assets. Revenue is generated in both Canada and the United States, with United States customers representing the largest share.
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