Hi Lou,
Can you please tell me if you think National Bank is a buy?
Thanks,
Jane
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Hey Jane,
Thanks for the assignment. This will be the second time that I examine the charts for National Bank of Canada (NA-TS. The last time was on June 1, 2011 for Bill. He was considering buying a bank stock and wanted my opinion. The research indicated that NA was the pick of the litter. The shares were in an established uptrend and the dividend offered a 3.5 per cent yield.
It was advised that the stock did have a tendency to pull back to support along the moving averages, which buyers saw as buying opportunities taking the shares to new highs. In 2013, the board of directors announced a two-for-one split that ignited new interest, taking the shares to a post-split high of $55.06 in November of 2014. Sadly, NA has experienced a steady decline from the highs through 2015 and into 2016.
An audit of the charts will add a technical parameter to your final decision.
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The three-year chart clearly indicates that the stock has been struggling since late 2014. There is some yak in the markets about NA's exposure to the energy complex and that, as the smallest of the Canadian banks, it has greater risk as financial technology competitors offer alternatives for mobile payments.
In technical analysis, the old saw is that the price of the stock has all that information baked into it. What we can see is that there is an established downtrend, resistance along the moving averages and a death cross that formed in July of 2015. None of these factors are leading to a screaming buy decision.
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The six-month chart illustrates the bounce off the 52-week low of $35.25 in January as the moving average convergence divergence (MACD) and the relative strength index (RSI) signalled an oversold situation that attracted buyers. What is evident is that we should expect resistance near $40 and then again at $41.
If you are bound and determined to add NA to your portfolio, the dividend offers a 5.51% yield. You could start accumulating the stock to earn income but do so over time, not all at one time. There isn't sufficient evidence to call for a trend reversal at this time.
Next time I will scout the charts of Bombardier (BBD.B-T) for Ryan Bonnar from AM640.
Make it a profitable day and happy capitalism!
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