Enjoy reading your commentary. I was wondering if now is a good entry point for Power Corp.
Great to hear from you again. Last time was in February when you wanted to know if the charts were signalling a good entry point for Canadian Utilities Ltd. (CU TSX). The shares were trading for $38.40 and it was advised that there were two ways to approach that investment. You could trade it for profit or accumulate shares and build a long term position. The shares moved up to just over $41.00 by April but has pulled back to about where you got in. Send me a follow up on how you decided to manage that stock.
Today you are asking about Power Corporation of Canada (POW TSX) which like CU owns a portfolio of assets that include interests in Great-West Lifeco, Inc. (GWO TSX), IGM Financial (IGM TSX), Power Financial Corp ( PWF TSX), media and communication assets, and holdings in Europe. The yield on the dividend is 3.91% which could be described as competitive in today’s market.
An scout of the charts will help identify if the current situation provides a good buying opportunity.
The first observable pattern on the three-year chart is the breach of the uptrend line in January of 2014. The break announced that the advance that began in late July of 2012 had run out of gas and that investors needed to make a decision on how best to proceed. In November of 2013 the MACD and the RSI signalled that the shares had become overbought which served as an early warning that the uptrend was at risk. Also worth noting is the topping pattern of lower highs and lower lows that occurred from November 2013 into January of 2014.
In addition POW has broken below the 50 and the 200-day moving averages. All of these patterns put a caution flag on the track from where I’m sitting in the grandstand at Talladega Raceway.
The six-month chart displays the bounce that came in off support at $29.00 in June of 2014. The next question that POW has to answer is can it move through resistance along the 200-day moving average. Not to be ignored is the new downtrend line that is in place which needs to be eclipsed from a risk management perspective before we can say with confidence that the selling has abated.
I would say that you would be best served biding your time before committing capital.
Make it a profitable day and happy capitalism!