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Realized a profit with Air Canada? Book it

As part of a deal between Air Canada and the government, the airline has been given another reprieve on financing its debilitating pension deficit of $4.2-billion.

THE CANADIAN PRESS

Hi Lou,

I would like your thoughts on Air Canada. I bought quite a few shares when they were at their 52-week low around $0.78. Should I sell and take some profit off the table or see if they hit the analysts target price of $3.55?

Lana

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Hey Lana,

Congratulations on a sweet get! It never hurts to have a hefty profit on the books.

A lot has changed since April 6, 2011, when I last conducted an analysis on a request from Jocelyn. The shares were trading at $2.31 and Jocelyn believed that the shares were undervalued and wanted to know when a bottom would form. Based on the research conducted on her behalf it was advised that the shares were in a selloff and that they would probably have to retest support at $2.00. The shares did continue to sell off, breaching support at $2.00 and finding a bottom at $1.75. The stock enjoyed a brief advance back to the $2.30 range by July of 2011 when it hit resistance and started a ten month decline to the 52-week low of $0.78 on March 23, 2012, where you decided to buy.

Another examination of the charts will help you decide if you should hold or sell.

The three-year chart depicts the advance that started in May of 2012 which has you sitting on a tidy profit. There is a slight bit of resistance at $3.00 and beyond at $3.25. The question is, is there enough to warrant sticking around for the next $0.50, or would you be better served to capture a profit? You might want to consider taking your original investment out and letting your profits ride. That would allow you diversify your holdings and take some of the emotion out of the next decision. Profits are not always available, especially in the airlines business.

The six-month chart is not indicating that the shares are about to reverse the uptrend. However the RSI is pointing to an overbought situation that would suggest that buyers have satisfied their appetite for the moment. If I were sitting on a large position with a healthy profit I would be selling enough to get my adjusted cost down to zero. Trees don't grow to the sky.

Make it a profitable day and happy capitalism!

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Have your own question for Lou? Send it in to lschizas@globeandmail.com.

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About the Author
Lou Schizas

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. More

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