Royal Bank of Canada another range bound bank

Dec 22nd, 2010 – Comment

At this point you want to trade the stock in the range for income and watch for breaks above resistance or below support.


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What is your assessment Royal bank stock re common shares. It has dropped pretty heavy since the first week of Dec. Is it a hold, sell or buy opportunity right now in your view?

Rob

 

Hi Rob,

On September of 2010 I filed a  post on The Royal Bank of Canada ( RY TSX) for Amir. At the time the stock was selling off  but put in a nice advance to a high of $57.00 in October. It has recently reversed itself back to $51.00 where it has found some support. The charts will provide a better look at the prospects going forward.

The three year chart illustrates the peak at $62.50 in May of 2010 and the retreat to $48.00 in late August. The stock moved higher into October but is now trading below its 50 and 200 day moving averages. On December 13, 2010 Moody’s cut their rating on the debt at RY because of their capital markets exposure. Bottom line the stock is in a range bound pattern with resistance to an uptrend.

The six month chart depicts the move off the late August lows and the peak in mid October.  Both the RSI and MACD signalled the shift in momentum in October. The sell off in December was triggered by the release of Q4 results that came in below forecast.

The MACD and RSI are both currently indicating that the oversold condition is reversing. The current dividend yield on RY is 3.9% which is attractive enough in today’s environment.

The RY story is currently on of a range bound stock with support at $51 and resistance at $57.00. Long term the stock is well positioned for growth given the relative weakness of the banking sector in the United States and Europe. The company has recently announced acquisitions in London and Asia as it seeks growth outside of North America.

At this point you want to trade the stock in the range for income and watch for breaks above resistance or below support.

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