Very few stocks are breaking out to the upside. One area of strength is insurance companies, which are gaining traction due to rising bond yields. Conversely, there is a growing number of stocks technically breaking down, notably, interest-sensitive securities such as real estate investment trusts, gold stocks, and food retailers.
Highlighted in this issue of the TSX Crosses report is Power Corp. of Canada (POW-T). The company's stock price is steadily gaining traction and may display a bullish "Golden Cross" shortly.
A "Golden Cross" occurs when a short-term moving average, such as the 50-day moving average, crosses above a longer-term moving average, such as the 200-day moving average. When this occurs, it marks a potentially positive signal suggesting the upward price momentum may have traction.
Many traders suggest waiting until the 50-day moving average crosses above the 200-day moving average by a certain percentage, such as 3 per cent, to confirm the bullish signal.
The opposite scenario is a bearish technical signal called a "Death Cross." A "Death Cross" is a potentially bearish signal for a stock that occurs when a shorter-term moving average, in this case the 50-day moving average, crosses below a longer-term moving average, in this case the 200-day moving average. When this occurs, it marks a potential negative signal confirming the downtrend in the price action may have traction.
With respect to the shares of Power Corp., the 50-day moving average is at $28.12, steadily approaching the 200-day moving average, which sits at $28.66. If the recent positive price momentum continues, the stock could experience a bullish "Golden Cross."
Shares of Power Corp. just broke out of a descending triangle pattern. This formation occurs when the share price is making lower highs resulting in a downward sloping upper boundary line. Meanwhile, there is solid support at a particular price point, forming a horizontal support line. In the case of Power Corp., there is strong support around $27. The next overhead resistance level is around $30, and after that, around $32.
The relative strength index is at 75, suggesting the shares are in overbought territory. Generally, a reading of 70 or above indicates an overbought condition.
From a fundamental perspective, analysts are forecasting modest gains for this stock. There are three 'buy' recommendations, seven 'hold' recommendations, and there are no 'sell' recommendations. One-year target price range from a low of $29 (implying the shares are fully valued) to a high of $34 (suggesting there may be 14 per cent upside potential). Individual target prices provided by seven firms are as follows: $29, $30, $31, two at $32, $33 and $34. The company offers shareholders an annualized dividend yield of 4.5 per cent.
Listed below are securities with recent Golden and Death Crosses, as well as potential future Golden and Death Crosses.
This report is based on technical analysis. Technical analysis does not replace fundamental analysis, but can help identify companies worth having a closer look at.