The Force is not strong with these investments

darth vader

 

In honor of the upcoming Star Wars movie to be released in 2016 (ValueTrend is a happy long termed holder of Disney stock. Go Darth, go!) I thought I would cover 5 securities that most certainly have not had the force working on their sides. Here are 5 trades that should be avoided for the time being. Remember, as Technical Analysts, we can change our minds on any of these securities – should the trends change to favorable. But for now, the force is not strong with these ones!

 

Gold

I will be the first to buy gold if/as/ when it breaks out of the base it’s been stuck in since 2013 – as noted on the chart below, somewhere near $1400/oz. Perhaps that will happen this summer, should the stock market begin to correct – given it’s sometimes negative correlation to stocks. I’ve blogged a fair amount recently on the technical evidence suggesting the potential for a significant correction later this year – feel free to look at the past few weeks blogs to learn my reasoning behind such a potential for a correction. Until gold breaks its consolidation pattern by penetrating the green resistance line on the chart, I will avoid this trade, unless I am looking for a very short termed oversold play. Perhaps you should too.

gold

 

The Bomber

Bombardier (BBD.B) broke down through technical support at just over $3/share, and currently looks to be heading back towards the next level of support near $2/share. Going forward, the potential for a slowdown in demand for high-end business jets, along with foreign exchange headwinds provide little hope for a turnaround in the near-term.

BBD

 

BlackBerry
Rumours abound regarding the future of this Canadian icon. Will Blackberry (BB) be bought out by Samsung? If so, this stock may be the buy of the century at the current price point. Despite the rumours, nothing has materialized surrounding that speculation that would inspire a high-confidence trade towards a merger for BlackBerry. Technically, BlackBerry remains contained within a consolidation pattern (much as gold has been contained in a similar pattern, noted above). A breakout through $14/share might inspire some technical traders to take a position in this stock, and possibly reach my targets as shown on this chart. My take on BlackBerry is that the stock is a gamble on a merger or takeover of the company. I’m not a gambler.

Blackberry

Sears
Sears (SCC) is a great example of a stock that no technical or fundamental analyst can make a case for – or against. This is truly a stock that offers no clear vision of prosperity, or demise, for its future. Don’t get me wrong- There are some potential catalysts for the stock: . If you believe that more dividends may coming out of the company to get rid of its cash on the balance sheet, or that the US parent will buy the Canadian operation out, or that they will successfully execute more real estate liquidation in the future—this stock may rally. An investment in SCC is not one for the risk-adverse investor, given that none of these potential scenarios is assured, and much of the value has already been realized through its prior real estate sales. The technical chart profile of the stock offers little hope for a rebound, beyond a quick move to $13.50 (top of the resistance zone shown on chart) inspired by the potential factors mentioned above. I for one will do my stock-shopping elsewhere.

scc

 

Canadian banks
How dare anyone say anything negative about our stalwart banks! It’s almost like insulting ice hockey, beer and poutine. At ValueTrend, We recently sold out of our BMO Canadian bank ETF (ZEB –T) after a disappointing winter for the sector. We got out on a brief rally at just under $23/share just before the current earnings season for the sector began – and are happy we did so. Canadian Banks are in a challenging environment that is not expected to pick up materially any time soon. All Canadian banks are in an environment that is seeing interest rate pressure spurred on by energy price uncertainty and challenging economic growth. The chart for the banks is not encouraging, despite the recent earnings news (mostly positive). Lower highs and lows = a downtrend folks. It doesn’t get much simpler than that. And yes, some day sooner or later the banks will be a great place to be again. Today is not that day.

ZEB

 

Change in blog format

Going forward, the SmartBounce blog will be posted on our ValueTrend site . If you go to the SmartBounce site to read the blog, you will be redirected back to the ValueTrend URL for that blog. We are making this change to reduce the work involved with maintaining two sites.

 

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