Bombardier meeting resistance at $5.00

Jul 17th, 2013 – Comment

BBD.B has been a choppy trader and I am not convinced the C Series is the dog that will save the company.


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Hi Lou,
After the Paris air show,the market is dead quiet about this company.Do you hear anything about the C-series? Please give me your take of this company’s future.

Many thanks,

Vince

 

 

Hey Vince,

Thanks for the assignment. This will be the fourth time that I undertake a case study for Bombardier (BBD.B TSX). The last time was on February 10, 2012 on a request from William. The shares were trading for $4.79 and William wanted to know if it was time to buy. The shares had bounced off support at $3.50 but were approaching resistance at $5.00 and along the 200-day moving average. It was advised to be patient and wait for a breakout above $5.00 before buying. Retrospectively that was the right call.

The stock didn’t have enough in it to move higher and by the end of February 2012 it began a retreat that lasted until late November when it traded down to its 52-week low of $2.97. From there it began a new advance to its current level. Another examination of the charts will help inform your decision on how best to proceed with this investment.

 

The three-year chart confirms the observation made in 2012 that BBD.B is not a buy and hold stock. You have to trade this one for profits by finding entry and exits points that work in your favour. You asked about the C-series jets that the company has developed. They didn’t announce any orders at the Paris show and had to push back the maiden flight of the jet until late July. Also keep in mind that there is competition in the space for this type of aircraft so expect a real donnybrook when it comes to filling the order book.

On a technical basis there is resistance coming in at $5.00 but the uptrend line has not been breached and support along the 50-day moving average has held. Finally the golden cross that formed in February of 2013 did signalled that buyers were still eager to step up to the plate for this stock.

 

 

 

 

 

The  MACD and the RSI on six- month chart created a generous buy signal in April when the stock was trading for approximately $3.90. The momentum indicators also generated a sell signal in June as the shares approached $5.00 and they are currently indicating a pullback. If BBD.B can move through $5.00 it could advance to $5.75.

 

For my money the stock doesn’t offer enough incentive to rate a buy. BBD.B has been a choppy trader and I am not convinced the C Series is the dog that will save the company.

Make it a profitable day and happy capitalism!

Categories: Aerospace
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