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Canoe Income Fund

04/11/14 11:33:17 AM
by Koos van der Merwe

On April 4, 2014 Canoe EIT Income Fund announced a warrant offering.

Security:   EIT.UN-T
Position:   Hold

Subject to the fund obtaining necessary regulatory and TSX approval, unitholders will receive warrants on the basis of one warrant for each whole unit held on record date. Canoe Income Fund is one of Canada's largest diversified closed-end investment funds listed on the TSX. The fund is designed to maximize distributions and net asset value for the benefit of its shareholders. The company is one of Canada's fastest growing mutual fund companies and as of March 31, 2014 manages approximately $2.3 billion in assets through its investment products. At its current price of $12.25, the yield on dividends paid is 9.99%.

Figure 1. Weekly chart showing a falling wedge.
Graphic provided by: AdvancedGET.
The chart in Figure 1 is a weekly chart showing a large falling wedge. In a falling wedge both boundary lines slant down from right to left but the upper line descends at a steeper angle than the lower line. When prices move out of a falling wedge, they are apt to drift sidewise and "saucer-out" before beginning to rise. The target suggested by the falling wedge is $19.30 (15.36-7.04=8.32+10.98=19.30). With an RSI trending upward, the target of $19.30 is possible.

Figure 2. Daily chart with JM internal band.
Graphic provided by: AdvancedGET.
The chart in Figure 1 is a daily chart with a JM Internal Band that gave a buy signal on February 11, 2014. The JM Internal Band is a 15-period simple moving average (SMA) offset by 2% positive and 2% negative. The RSI indicator gave a buy signal on February 4, 2014 and the share price rose strongly. The RSI indicator is approaching overbought levels, with the upper resistance trendline target in the region of $12.45.

With the weekly chart in Figure 1 suggesting a target of $19.30, with a dividend being paid offering a yield of 9.99% at a share price of $12.25, and with the daily chart in Figure 2 suggesting a correction in the near future as the RSI is at overbought levels, buying the share on a correction becomes an attractive play.

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
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