Flash Alert: New Advice on Penn West Energy

We are raising our stop-loss on Penn West Energy Trust (NYSE: PWE) to 21.50. If you don’t already own shares of Penn-West Energy, do not buy the stock at this time. The stock now rates a hold.

Originally recommended in the May 2010 installment of Stocks on the Run, Penn West Energy is up roughly 29 percent when you include dividends. That’s a solid gain relative to the S&P 500, which is up only 6.4 percent, and the S&P 500 Energy Index, which is up a tad less than 5 percent.

When we advised readers to buy Penn West Energy, we felt that the stock would benefit from a number of catalysts, including improving sentiment toward energy stocks, rising crude oil prices and more clarity on the company’s planned dividend policy as it changes from a trust into a corporation. These catalysts have largely played out as we expected, and the stock has rallied sharply, particularly since mid-September.

We see further upside for crude oil prices and shares of Penn-West Energy between now and year-end. By raising our recommended stop, we’re locking in a gain of around 22 percent. If the stock heads higher, we’ll still be on board and will raise the recommend stock even further to lock in incremental gains.

Please note that Stocks on the Run does not focus on long-term investing; our stated goal is to generate returns over a three- to nine-month holding period. Fundamentally, Penn West remains an attractive income-oriented stock for long-term holders and is recommended in our sister advisory, Canadian Edge. Long-term holders should be particularly careful about the use of stop orders; stops are most appropriate for the aggressive short-term trades we cover in Stocks on the Run.

Penn West Energy Trust (NYSE: PWE) rates a hold, and we are raising the stop-loss to 21.50.

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