Canadian Western Bank a hold.

Mar 30th, 2016 – 1 Comment

CWB is exposed to the oil industry


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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.


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CWB LOGO

Hey Lou,

I bought about $10 000 of Canadian Western Bank and made a healthy 25% profit (not to mention the stock had gone ex div and I will receive 5 more shares at the end of the month). My question is if there is more upside left in the stock, it can never seem to break out above $25 a share… Plus because of the share price growth the dividend has become anemic compared to other banks (with that said they also have a much lower payout ratio). Long story short should I keep it for a long term hold (5 year plus)?

Thanks in advance,

Zenon

Hey Zenon, Congratulations on your great call and the profits that you have generated! I won’t be able to make a call five years out. I don’t think anyone can. I can however take a snapshot of what is happening right now.

This will be the second time that I examine the details surrounding Canadian Western Bank (CWB TSX). The last occasion was on August 7, 2015 on an assignment from Steve who was wondering if the stock offered a good entry point.

The shares were trading for $25.10 and the dividend yield was 3.51%. The research indicated that the stock had topped out in August of 2014 when it traded for $43.17. The decline saw CWB breach support along the moving averages in October and a death cross form in December, 2014. In late July of 2015 the stock hit a 52-week low of $22.50 where it caught a bounce but met resistance near $25.50. It was advised that the advance could have more in it but that a trade did not imply a reversal of the established downtrend. In hindsight that was the correct call. CWB pulled back to $22.50 within ten days

Another analysis of the charts will help answer your question.

 

 

CWB

The three-year chart illustrates the 52-week low of $19.26 that CWB hit in January of 2016 and the subsequent bounce on a retest near that level in late February. The leg up took the stock through resistance along the  moving averages and the downtrend line. What is also apparent is the resistance that has come in near $25.50.

 

 

 

CWB2

The six-month chart holds a number of interesting patterns that demand comment. The first thing to note is the double bottom that formed  between mid January and late February. The second are the buy signals generated by the MACD and the RSI in early March as the stock started its move higher.

Finally there has been a pullback with tests of support at $24.00 and the 200-day moving average.  I wouldn’t want to shoot this running horse given the potential of a sustained trend reversal. However make sure to watch this one like a hawk given their exposure to the oil economy.

Next time I will inspect the case involving Enghouse Systems Ltd. (ESL TSX) for Mario.

Make it a profitable day and happy capitalism!

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