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Bombardier should be traded for a profit
schizas’ mailbag
Lou Schizas
Special to The Globe and Mail

This article was published more than 8 years ago. Some information may no longer be current.

Hi Lou,

What is your take on Bombardier shares?

Regards,

Alessandro

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Hey Alessandro,

Thanks for the assignment. This will be the sixth time since 2009 that I scrutinize the charts for Bombardier Inc. ( BBD.B TSX). The last was on December 17, 2014 when the shares were trading for $3.90. Vince wanted to know if the stock could be taken off life support. The evidence at hand indicated that the downtrend that had started in October of 2013 came to an end in October of 2014.

BBD.B ran to $4.40 by late November where it met resistance and then proceeded to pull back and test support near the 50-day moving average. The MACD and the RSI signalled a sell as we came into early December of 2014 with the shares having become overbought. The conclusion arising from the research was that there were no indications that we could expect a new leg up and the best way to manage this investment was to trade it for profit and not simply buy and hold the paper.

Retrospectively that was the right call. The stock gapped down in early January of 2015 and it hit a 52-week low of $2.24 at the end of June.

An inspection of the charts will form the basis of my opinion.

Desktop users click on image to enlarge

The three-year chart illuminates the trail of tears that investors who held the stock have had to endure. The break below the 50 and 200-day moving averages in January of this year was triggered as the company announced the write down on its business jet assets and the lay off of over 1,000 workers.

Make note of the death cross that surfaced in early February and the resistance near the 50-day moving average that has come into play .

Desktop users click on image to enlarge

The six-month chart is not providing any signals that we can expect a move higher. The drop from $2.60 in June can be attributed to the failure to announce any deals for the C-Series Jet at the Paris Air Show. I reiterate my previous call that you need to trade BBD.B for profit.

Next time I will probe the charts of Silver Wheaton Corp. (SLW TSX) for Sam.

Make it a profitable day and happy capitalism!

Have your own question for Lou? Send it to lou@happycapitalism.com.