APA firing as pipelines offer solid returns for followers

Readers who are either students of Australian political history or have long memories will probably recall one Rex Connor, the firebrand resources minister in Gough Whitlam's government. He enraged many of the political and business elites with his grand vision of economic nationalism that would see the government borrow billions to, among other things, build a national energy grid.

Rex went his way prior to Whitlam's epic 1975 defeat when he was exposed trying to borrow the necessary money in the form of petro dollars through the mysterious Pakistani financier Tirath Khemlani without telling anyone. The resulting "loans affair" scandal tainted Connor's reputation but, guess what, 40 years on his vision has come to pass.

What's more, you can now use conventional financial methods to get exposure. This week we look at one such option, APA Group stapled securities. Victorian president of the Australian Technical Analysts Association Paul Ash has produced a chart of APA back to 2008.

The company itself is pretty impressive. Its $10 billion of pipelines connect the gas fields of Queensland, the Northern Territory, Western Australia and South Australia with the consumer markets as far away as Victoria and New South Wales and deliver 50 per cent of Australia's gas.

It's yielding about 6 per cent (unfranked) and last year's profits jumped 20.4 per cent. It has delivered shareholders wise enough to have bought into its 2000 IPO close to a 700 per cent return.

Ash observes that APA has been in a rising trend since early 2009 but experienced trend retracements in mid-2011 and mid-2012, both lasting about four months. Technical analysis defines APA's upward trajectory as a major trend because the retracements find support at what previously were resistance levels.

The fact that the share price has mostly been above the red 30-week moving average line is another sign of strength. Only at the bottom of the two recent retracements did that situation turn around.

But traders should keep a close eye on the chart. Ash expects we could be due for another retracement back towards $5.30, the highest resistance line shown on the chart. That may not spell disaster. But if a retracement lasts for longer than four months or there is a weekly close below $5.30 then the trend will likely have changed and the smart trading money will exit for other opportunities.

This column is not financial advice. rodmyr@gmail.com