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Texas Instruments A Buy?

02/26/13 12:09:21 PM
by Koos van der Merwe

Texas Instruments increased its dividend. Is it a buy?

Security:   TXN
Position:   Buy

Without doubt, in an uncertain market, money drifts towards dividend paying stocks. With the average investor uncertain of market direction - never forget they only start buying when the market tops out - buying a stock that pays a good dividend is one way they feel will cover losses they may face in the future. So when a stock announces that it is increasing its dividend, two things come to mind.

1. The company must be showing good profits to increase their dividend.
2. Nice to own a stock that is paying a pleasant dividend and hopefully one that can score on growth as well.

Fig 1. A daily chart of Texas Instruments showing Elliott Wave count and Fibonocci Extension target
Graphic provided by: AdvancedGET.
The chart in Figure 1 is a daily chart of Texas Instruments and shows how the price has risen in an Elliott Wave count. The chart is suggesting that the price is moving into a Wave 5 with a target of $36.55. This target is based on the Elliott Wave rule that a wave 5 should be equal to the length of Wave 1. The target is then set using a Fibonocci extension pattern. Do note the RSI, which is still weakening. Also note the volume which rose as the price fell, and then continued rising as the price rose with the announcement of the dividend increase. This tells us that the board of Texas Instruments kept their intentions very secret.

Figure 2. Daily chart of Texas Instruments showing a BUY signal given on a JM Internal Band indicator
Graphic provided by: AdvancedGET.
Looking at the chart using the JM Internal Band indicator we see that a sell signal was given on February 21, 2013 as the closing price broke below the lower band, and a buy signal was given on February 22, 2013 as the closing price broke above the upper band. The JM Internal Band indicator is a simple 15-period moving average offset by 2% positive and -2% negative.

With chart of Texas Instruments suggesting a buy signal based on an Elliott Wave count, and a buy signal based on the JM Internal Band indicator, I would be a buyer of the stock.

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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