Bank of Montreal range bound

Dec 20th, 2010 – 1 Comment

Currently the stock is more of a trade than a hold so make sure your investor profile can profit from the opportunity.


About the Author

Lou Schizas is an equities analyst, investor, entrepreneur, professor and television and radio personality – and a true believer in the happiness-inspiring powers of capitalism.


Read the author's full profile.


Further Research

Read more about Banks.


Greetings,

I was wondering what would be your input on Bank Of Montreal. I bought the stock few days ago and it’s down by 6%.
Is it a hold or sell.

My Best,

Vica

Hi Vica,

I posted on the Bank of Montreal ( BMO TSX) on June 3rd of 2009 for Glenn. At the time the stock was on an uptrend and provided good returns into 2010. My post of September 03 , 2010 indicated that the stock had its highs in April and was struggling to get back on track to an upside. 

The hit you took on your purchase came after BMO announced their US$4.1 billion acquisition of Marshall and Ilsley to expand their footprint in the U.S. Marshall and Ilsley is the largest bank in the state of Wisconsin with branches in seven other states and $53.9 billion in assets. The rub on the deal is that analyst surmised that BMO overpaid for the company and then Moody’s jumped in to review the rating on BMO’s debt.

The charts will provide a better sense of  trend, support and resistance.

The three year chart illustrates the range bound trading that BMO has been in since May of 2010 with resistance at $62.50 and support at $58.00. The big advance from the March 2009 lows is behind us and now what  the stock needs to break above resistance is improved results, higher dividends, or both!

The six month chart depicts the range with support at $58.00 and resistance at $62.50. The fact that the stock is trading below its 50 and 200 day moving averages doesn’t suggest a quick return to a sustain uptrend. The stock has oscillated through the range three times in the last six months suggesting that BMO offers opportunities to trade for income.

The MACD has proven a valuable signal generator for opportunities to buy and sell BMO through the range.

Another factor that you can not ignore is the 4.80% dividend yield that the stock offers. In an environment where Government of Canada bonds, the risk free investment, are offering substantially lower returns,  a 4.80% yield looks pretty attractive.

It was easier to consider BMO in June of 2009 when it was in a sustained uptrend. Currently the stock is more of a trade than a hold so make sure your investor profile can profit from the opportunity.

MAKE IT A MASSIVE CHRISTMAS AND HAPPY CAPITALISM!

Categories: Banks
Content © Relentless Economics - Charts courtesy Stockcharts.com - Employees Entrance - Optimization Media