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A Buy In May?

05/07/12 09:04:56 AM
by Koos van der Merwe

The maxim is "Sell in May and go away." Here is one stock that is suggesting the opposite.

Security:   RBC-T
Position:   Accumulate

Royal Bank of Canada (RBC) followed the financial world with the collapse of May 2007, as the mortgage-backed crisis punished financial institutions throughout North America. Figure 1 shows this.

FIGURE 1: ROYAL BANK OF CANADA, MONTHLY
Graphic provided by: AdvancedGET.
 
The chart is a monthly chart of Royal Bank of Canada and shows how the price dropped from a high of $61.25 in May 2007 to the low of $25.57 by February 2009. From that level it rose to $63.06 by April 2010. Since then, it traded in a range falling as low as $43.46 by November 2011 before recovering once again. The relative strength index (RSI) is still suggesting a positive trend.

FIGURE 2: ROYAL BANK OF CANADA, DAILY
Graphic provided by: AdvancedGET.
 
The daily chart (Figure 2) shows how the price rose from a low of $43.23 on November 25, 2011, to a high of $59.20 by March 2012. From that level it is forming another equilateral triangle, which is suggesting a target of $65.32 when the upper trendline of the triangle is penetrated.

The price is still trading with the JM internal band, and a break above the upper trendline will confirm a buy signal. The JM internal band is a 15-period moving average offset by 2% positive and 2% negative. Do note that the XTL trend indicator that colors the price candlestick bars is still black, which is neutral. Blue suggests a buy and red suggests a sell.

I would not be a buyer of RBC at the moment, but it is a stock that is now on our watchlist, waiting for a definite buy signal.




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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