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Parking Money With Aegon H

05/18/12 08:45:27 AM
by Koos van der Merwe

When the market corrects, the gamblers buy as stocks fall. Investors wait until the market turns and only buy as the shares rise. Aegon is an example

Security:   AEH
Position:   Accumulate

To buy a share in a falling market can be a gamble, because we can never be sure how low the price can fall. It is far better to buy in a rising market, even at the same price, but with the latter, at least you know that the share price is on the way up. However, what do you do with your money while you're waiting? Bank interest rates are low at the moment, so investors look for dividends of stocks that tend to move sideways with low volatility.

One share to take note of is Aegon Preferred H (AEH). The yield is in the region of 6.6% at the current price of $23.96. Not that bad, and if we are lucky enough to wait for a drop and then buy it on the way up, we could receive an even greater yield. When I wrote about AEH on March 2, the yield was 7.02%. It is still worth a buy now.

Graphic provided by: AdvancedGET.
Figure 1 is a weekly chart of Aegon Preferred H shares and shows how the price has fallen from a high of $26.14 in April 2007 to a low of $2.92 by March 2009. The price then rose to $24.58 by May 2011. Since then the weekly chart shows that it has been moving in a sideways pattern, between $18.07 and $24.58. The relative strength index (RSI) is suggesting that the price should correct to the lower support line.

Graphic provided by: AdvancedGET.
Figure 2 shows that the price is trading within the JM internal band, Because the closing price did not fall below the lower band, the trend is still positive. The price did, however, fall below the trailing stop on April 5, so we would have sold then and waited for a move above the upper JM internal band before buying. The RSI has not given a definite buy signal, so we should be cautious. Finally, do note that the candlestick is blue, suggesting a positive trend is in place.

On March 2, I wrote an article highlighting Aegon Preferred H as one that should be watched. I have not changed my view.

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.

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