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Income-Producing Shares

10/21/10 08:41:36 AM
by Koos van der Merwe

When in doubt, buy shares of a stock that gives you a good yield.

Security:   EIF-T
Position:   Buy

Canada has not increased its rates, so the money of conservative, scared investors -- let's face it, there are plenty out there -- are all looking for a return that is safe and sure. Here is one share that could be considered. Exchange Income Corp. (EIF-T) is a Canadian corporation, created to invest in profitable, well-established companies with strong cash flows operating in niche markets in Canada and/or the United States to distribute stable monthly cash dividends to its shareholders. As of this time, the yield offered is 9.4% at a market price of $17.

FIGURE 1: EXCHANGE INCOME FUND
Graphic provided by: AdvancedGET.
 
Figure 1 shows how the price has risen from a low of $1.22 in July 2009 in a series of flags, triangles, and pennants to its present price of $17, with the newest consolidation triangle suggesting a target of $20.59.

The relative strength index (RSI) is suggesting weakness, but then a look at the past performance of the indicator shows that unless the price has a major consolidation, it is not that effective.


FIGURE 2: OMNITRADER SHOWS BUY SIGNALS
Graphic provided by: OmniTrader.
 
Figure 2, an OmniTrader chart using my red/green strategy to forecast market movement, shows how the stock price gave a sell signal on a gap on October 18, which was quickly followed by a new buy signal on October 20 (two days later). This has been confirmed by the RSI volume histogram indicator, but not by the stochastic RSI cycle indicator. Note that the sell signal was given when it broke through the Vervoort stop of 1.5%, but it did not break the Vervoort stop of 4%. I am inclined to use the 1.5% Vervoort stop for daytrading, and the 4% Vervoort stop for investing.

Yes, I would be a buyer of EIF at these levels, because 9% income is like stealing candy from a baby.




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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