Could you take a look at Loblaw.
Thanks for the assignment. This will be the third time since 2013 that I investigate the case for Loblaw Companies Ltd. (L TSX). The last time was on March 10. 2014 when the shares were trading for $46.34. Bryan owned shares of Shoppers Drug Mart which was in the process of being taken over by L. He wanted to evaluate if he would be best served selling his shares or taking shares in L.
The research indicated that the MACD and the RSI were not signalling a shift lower but that there was resistance at $47.00 that had to be overcome. It was also mentioned that when the acquisition of Shoppers Drug Mart got through the regulatory process that there would be opportunities for cross selling between the platforms. In addition it was posited that Shoppers could grab market share from convenience stores.
It was advised that the decision to sell or accept the offer depended on his investor profile. If he had an appetite for risk he should go with L. If he was risk averse he should take the cash and look for another ride.
Another inspection will provide another element to your evaluation.
The three-year chart indicates that L topped out in August of 2015 hitting a 52-week high of $74.48. From there the stock began a retreat that extended into 2016 where it found support near $62.50 where it caught a bounce.
What is also visible is the double bottom that formed in 2016 pointing to a potential reversal of the downtrend that started last August. Finally make note of the resistance that comes in near $72.50.
The six-month chart pulls the focus on the double bottom and the concurrent buy signals generated by the MACD and the RSI. At the moment sellers have moved in as the stock has become slightly overbought and the momentum indicators are turning lower.
The best way to proceed is to look for a buying opportunity once the selling has abated.
Next time I will audit the charts of Atlantic Power Corp. (ATP TSX) for Bob.
Make it a profitable day and happy capitalism!