Today I will conclude the assignment from Sandra. Last time she wanted my thoughts on which of two bank stocks would meet her desire for an income producing investment. Last time I conducted a study of Canadian Imperial Bank of Commerce (CM TSX). Today’s inspection of the charts for Bank of Montreal (BMO TSX) will be my analysis of the shares fifth since 2009.
The last time was on December 20. 2010. Vica was sitting on a 6% capital loss on a pullback in the stock and wanted to know if she should hold or sell. The shares were trading for $58.00 and the dividend yield was 4.8%. The research pulled into focus a stock that was range bound with support at $58.00 and resistance at $62.50. The evidence indicated that BMO would best be managed as a trader within the range until there was a clear sign of a breakout or a breakdown.
Retrospectively that was the right call as the stock didn’t breakout until June of 2013 when it started a new leg up.
Another probe of the charts will provide the background for a comparison with Canadian Imperial Bank of Commerce.
The three-year chart illustrates the leg up that started in June of 2013 and came to an end in September of 2014 when it hit a 52-week high of $85.71 . There is now an established downtrend that has to be acknowledged and a death cross that formed in February of 2015.
In April of this year the MACD and the RSI signalled a sell as BMO retreated from $80.40 and generated a number of bearish patterns. Resistance along the 50-day moving average came into play in June and support at $72.50 was breached in August.
The six-month chart provides a close up of the sell signals from the momentum indicators and the resistance along the 50-day moving average. There are currently no patterns to suggest we can expect a trend reversal in the short term.
From a technical perspective the shares of Canadian Imperial Bank of Commerce (CM TSX) offer the better profile when compared with BMO.
Next time I will examine the charts for Enbridge Income Fund Holdings Inc. (ENF TSX) for Mike.
Make it a profitable day and happy capitalism!