This tour operator’s shares are on a long climb skyward

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Hi Lou,

I have been holding TRZ/B.TO for a while and my cost is $12.50. Just wonder if it's time to take profit or let it ride?

Thank you very much,

John

Hey John,

Thanks for the assignment.

Transat A.T. Inc. is a tour operator that has approximately 29 per cent market share in the sun and fun destination segment. They compete in the space with Sunwing with 29 per cent, WestJet with 17 per cent and Air Canada with 14 per cent. The company has undertaken a cost-cutting and efficiency drive over the last year that has helped drive the stock higher.

The soft spot in the calendar has been the November to April period where the company has reported losses over the last two years due to facing off the competition. The question is, can they hold off the challengers this year?

An examination of the charts will help determine the best course of action with this investment.

The three-year chart has a number of interesting features worth reviewing. The first is the trend reversal that occurred in August of 2012 as the shares bounced off the rock bottom at $3.00 and began a new advance to $6.75 in March of 2013. The stock pulled back to retest support along the 200-day moving average in April where the MACD and the RSI both generated buy signals. A golden cross surfaced in late June when TRZ.B was trading near $8.00 adding to the bullish outlook.

The six-month chart outlines a trading pattern where the stock advances and then builds a base before moving higher. The base building at $8.00 gave way to an advance to $11.00 and was followed by base building on the way to over $13.00. The MACD and the RSI signalled a buy in September as the stock moved off of $8.00 to $11.00. At this time the shares are overbought but there are no indications that the trend is about to reverse.

You asked if you should stay or go and all indications are that there is more to come. The uptrend line is intact, the momentum indicators are not generating sell signals, and there is very little resistance up to $15.15.

Make it a profitable day and happy capitalism!

Have your own question for Lou? Send it in to lschizas@globeandmail.com.