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HEAD & SHOULDERS


Sun Life Of Canada

12/06/10 09:15:39 AM
by Koos van der Merwe

Finally, here's a financial stock worth looking at.

Security:   SLF-T, SLF
Position:   Buy

Canada did not suffer as much as the United States in the recent recession -- the reason being, as everyone knows, the greater restrictions placed on the banks and other financial institutions than in the US. Nevertheless, banks have been given free rein to trade the stock market on behalf of clients and to compete with established insurance companies by offering products that may or may not be competitive. Looking at their poor mutual fund performance, as compared to the days before many mutual funds were acquired by the banks, we do get the impression that Canadian banks have mainly gone after assets, with client performance taking second place. Thus, it is interesting to find one of the original insurance companies suggesting a buy signal.

FIGURE 1: SLFX, WEEKLY
Graphic provided by: AdvancedGET.
 
Figure 1 is a weekly chart of Sun Life of Canada suggesting that Wave II is forming a flag pattern, due to a breakout, should the price rise above the $29.60 level. This appears to be in the cards, as suggested by the rising relative strength index (RSI). The target suggested is $47.07 (38.65 - 15.17 = 23.48 + 23.59 = 47.07).

FIGURE 2: SLFX, DAILY
Graphic provided by: OmniTrader.
 
Figure 2 shows that the vote line based on my red/green trading strategies, with an added ergodic osciilator strategy, has given a buy signal. This is confirmed by the stochastic RSI cycle indicator. The chart also suggests an inverted head & shoulder formation with a target of $33.94. The resistance line shown does offer resistance at $29.24. A move above this level will confirm a buy signal. The one negative is the trumpet pattern (broadening formation) that has formed, suggesting uncertainty.

I would be a buyer of Sun Life of Canada at present levels. A more conservative investor would wait for the price to break above the $29.24 level.




Koos van der Merwe

Has been a technical analyst since 1969, and has worked as a futures and options trader with First Financial Futures in Johannesburg, South Africa.

Address: 3256 West 24th Ave
Vancouver, BC
Phone # for sales: 6042634214
E-mail address: petroosp@gmail.com

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