I was on BNN television last Thursday talking about the broader markets, as well as my outlook for gold, metals, oil and the banks. This week I’ll highlight two of those sectors.
WTI crude, and the energy equities that trade on the TSX look bullish. The chart patterns are (not surprisingly) similar, so I’ll just reference WTI crude for this exercise. I’ve mentioned in past blogs that oil had been trading in a fairly range bound pattern between the mid-$90’s to around $102/barrel. Last week saw a definitive break out of that range – helped by the situation in Iran. There’s really nothing to stop this sector from reaching its May 2011 highs ($114/barrel or so). The momentum is strong, there is little technical resistance until those old highs come into play, and the fundamentals on the equities are reasonably attractive. Seasonally, this can be a good place to invest until the spring, according to Don Vialoux at www.dvtechtalk.com
I’ve mentioned the banks in a prior blog, but they are worth looking at again. As you may know, I believe the market tends to move through 4 phases (bottom, uptrend, top, downtrend). Read my book Sideways for details on recognizing these phases. Last year’s 8-month downtrend on the banks was broken by a classic “Phase IV” bottom phase. Take a look at the BMO Equal Weight bank chart (ZEO-T) and note the consolidation below $17 that formed the neckline at that level, followed by a classic breakout and retest of that neckline. There is a little overhead supply coming in at $17.60 on the ZEB chart, but from there it would appear to be clear sailing out into $18.20. Translate that pattern into your favorite Canadian bank stock, and it would appear that there is some decent potential for the banks.