Hello Mr. Schizas;
Could I, please, have your opinion on Canaccord Financial? It does not look at all appealing in the short term, as the moving average (50) crossed MA(200) and all the recent highs are below the MA(50). Do you believe it's possible and probable to see this stock trading at or below $10.50 before bottoming out, as suggested by the trend of the lows and the highs of the last 4 months?
Best regards,
Dio
Hi Dio,
Thanks for the assignment. Canaccord Financial Inc. provides a classic example of strong financial performance not being reflected in the direction of the stock. The company beat the Street in five of the last six quarters. Substantially so in the third quarter and fourth quarter of 2011.
What might be driving the trend are concerns about sustainability of the growth. The driver in the results was the contribution of the investment banking unit. Mergers and acquisition activities and fees can be a feast or famine business.
Let's consult the charts for a better sense of direction as we go into the last 164 days of 2011.
The three-year chart illustrates the advance that started in June of 2010 when the shares were trading at $8.00. When the stock hit $16.00 in February of 2011 investors who caught the ride had to be looking to book some of their gains.
You will also notice that the trend line that supported the advance was breached in February. Providing another reason for informed investors to reconsider their exposure.
The six-month chart provides a close up of the recent trading action in the stock. What is evident is that the MACD generated a number of buy and sell signals between February and July 2011. What is also worth noting is that every attempt to move higher has met resistance along the 50-day moving average.
At this point the shares are trading in a down channel and on thin volume. The average daily volume over the last three months is 162, 889 shares. In the last 30 days it has only traded above that volume once.
The stock does seem to be trying to hold onto support at $12.00. If that doesn't hold then your $10.50 outlook could be in the cards. The company is scheduled to report first-quarter 2012 results on Aug. 4th. It would be wise to see how it trades as we approach that flex point.
Make it a profitable day and happy capitalism!
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