Thursday’s TSX breakouts: This financial stock is poised to give a technical buy signal

The positive momentum in the S&P/TSX composite index stalled on Tuesday with the Index declining 91 points, or 0.65 per cent. There were 73 securities that advanced, 158 declined, and four stocks were unchanged.

Given the retreat in the Index, today's TSX Breakouts report is light with only 12 stocks on the positive breakouts list (stocks with positive price momentum) and 10 stocks on the negative breakouts list (stocks with negative price momentum).

Discussed today is a financial stock that has been steadily making it way higher, Sun Life Financial Inc. (SLF-T).

A brief outline is provided below that may serve as a springboard for further fundamental research.

The company

Sun Life Financial is an international financial services company that provides insurance and investment products and services through its global operations. As of the end of the first-quarter, assets under management totaled $861-billion.

After the market closed on May 10, the company reported better-than-expected first-quarter financial results. Earnings per share (EPS) was 95 cents compared to the Street's forecast of 90 cents. The stock price rose 0.8 per cent the following trading day.

Dividend policy

Management is committed to returning capital to its shareholders. The company announced a 4-per-cent dividend increase last week, and announced two dividend hikes in 2015.

Sun Life pays shareholders a quarterly dividend of 40.5 cents per share, or $1.62 on a yearly basis. This equates to an annualized yield of 3.7 per cent.

Valuation

According to Bloomberg, the stock is trading at a price-to-earnings multiple of 11 times the 2017 consensus earnings estimate, which is below its three-year historical average of 11.6 times, suggesting there is room for multiple expansion.

Analysts' recommendations

According to Bloomberg, the one year price target is $46.26, which is based on 12 buy recommendations and four hold recommendations. This implies the share price can potentially increase 4 per cent. Analysts' target prices are relatively concentrated, and range from a low of $43.50 to a high of $50. Individual price targets are as follows: $43.50, $44, three at $45, two at $46, $46.16, four at $47, three at $48, and $50.

The consensus EPS estimate is $3.73 in 2016, and forecast to rise 8 per cent to $4.04 in 2017.

Chart watch

Year to date, shares of Sun Life are up approximately 3 per cent but have rallied 19 per cent since February 11.

The stock is on the cusp of a bullish technical signal - a "Golden Cross". A "Golden Cross" occurs when a short-term moving average, in this case the 50-day moving average, crosses above a longer-term moving average, in this case the 200-day moving average. When this occurs, it marks a potentially positive signal suggesting the upward price momentum may have traction. This occurrence indicates a potential buying opportunity to investors. The 50-day moving average is currently a few pennies below the 200-day moving average.

There is overhead resistance just below $46, and then at $50. Downside support exists just above $42, close to its 50-day moving average (at $42.25) and its 200-day moving average (at $42.28).

The Breakouts file is a technical analysis screen intended to identify companies that are technically breaking out. In addition, this report highlights a company's dividend policy, analysts' recommendations, and provides a brief technical analysis for a security to provide readers with more information.

If a stock appears on the positive breakouts list, this indicates positive price momentum, and that a company may be worthwhile for investors to look at the fundamentals in order to determine if the recent price strength is warranted and will continue. If a security appears on the negative breakouts list, this indicates negative price momentum, and may be indicative of either deteriorating fundamentals or perhaps indicates a buying opportunity.

A technical analysis screen does not replace fundamental analysis, but can help identify companies worth having a closer look at.

Below is a list of securities principally from the S&P/TSX composite index and the S&P/TSX Small Cap index that are technically breaking out, reaching new 55-day highs or lows. Securities on the positive breakouts list have displayed positive price momentum during this period. Securities on negative breakouts list have experienced negative price momentum.