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TECHNICAL ANALYSIS


When In Doubt Stay Out

10/25/16 11:24:40 AM
by Koos van der Merwe

With the American Presidential campaign more and more capturing everyone's attention, where is the stock market going and what stock would probably be a good buy?


Security:   SPX,DPZ,PZA-T,WB-T
Position:   Accumulate

The American Presidential election is all one hears and talks about. The obvious question on everyone's mind is, whichever candidate wins, how will it effect the stock market? Does one take a gamble and purchase a stock ahead of the outcome, or is it better to simply sit on the sidelines and wait to see who the next President of the United States of America will be? The election voting will be held on November 8th, so do you sit on the sidelines doing nothing until after the election, or do you look for stocks that are bottoming and slowly buy them? With monthly charts also hinting that the major indexes will start correcting, looking for safe investments paying steady yields is becoming more and more a must.

Figure 1. The Presidential Cycle.
Graphic provided by: AdvancedGET.
 
The chart in Figure 1 is a monthly chart of the S&P 500 index drawn on the Kondratiev Wave chart with the Presidential Cycle. The chart is suggesting that whoever the next President of the United States will be, the S&P 500 index will start falling. Does one now move to cash, or look for a safe investment?

Figure 2. Domino Pizza.
Graphic provided by: Omnitrader.
 
The chart in Figure 2 is a chart of Domino Pizza. The Vote line on the Omnitrader chart is suggesting a buy based on the three strategies shown below the Vote line. Looking back at previous buy signals given, one can see that they have always been successful, so buying the share could be a safe investment. Domino Pizza is an American pizza restaurant chain and international franchise pizza delivery corporation headquartered in Michigan. Since March 2016, the company has paid a quarterly dividend of $0.38. Buying the share could well be a safe investment.

Figure 3. Pizza Pizza.
Graphic provided by: Omnitrader.
 
Keeping pizza on the mind, a food enjoyed by many, one could also look at the Canadian market, a market that should not be affected badly by the American Presidential campaign. The share Pizza Pizza is shown in chart Figure 3. The Vote line suggested a sell on October 4th based on the Vervoort Stop Strategy. The RSI indicator is trending down, suggesting the share price should fall. This correction could present a solid buying opportunity.

Figure 4. Whistler Blackcomb.
Graphic provided by: AdvancedGET.
 
Of course there are many other shares that present a safe investment when times get tough. One that does come to mind is the share Whistler Blackcomb, shown in Figure 3. The share price has risen strongly in an Elliott Wave 3 since February 2016 and on rising volume. The chart is suggesting that the share price should fall to either $48.45 or $39.08. The probability of this happening, as shown by PTI on the chart is 82%. The RSI indicator shown on the chart is trending down. However, looking back at the chart at previous corrections one can see that the indicator did not fall to the 32 buy level. Looking at the JM Internal Band, one can see that the share price is presently a buy. The JM Internal Band is a 15 period simple moving average offset by 2% positive and 2% negative. A move above the upper band suggests a buy and below the lower band a sell.

Until November 9th when the results of the Presidential vote is announced, many investors will be cautious about what to invest in. Staying in cash may be the best way to go — "When in doubt, stay out."



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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