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(Christinne Muschi/christinne muschi)
(Christinne Muschi/christinne muschi)

Financials

Time to take profits on Sun Life? Add to ...

Hi Lou, I’m up on Sun Life stock. Where do you think it will go? It’s a tough stock to sell since the dividend is $.35 share . Once interest rates begin to rise, do you think it will be over $50 a share?

Thanks, Cam.

Hey Cam, Thanks for the assignment and congratulations on a great get. This will be the second time that I examine the charts for Sun Life Financial Inc. The last time was on January 16, 2012 on a request from Cedric. The shares were trading for $20.05 and producing a dividend yield of 7.2 per cent. Cedric was concerned about the possibility of a cut in the payout and wanted my opinion.

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I have to admit that I didn’t get all of SLF. From the evidence at hand it didn’t appear that the shares were worth chasing but by mid April of 2012 they were trading for close to $25.00. The advance however was then followed by a retreat back to $20.00 for a bit of a round trip. By August of 2012 buyers took control of the stock taking investors on a sustained advance that has endured for the last eighteen months.

Another inspection of the charts will help address your questions.

The three-year chart depicts the uptrend line that has been tested but not breached and the support the stock has enjoyed along the 50-day moving average. There is resistance that comes in at $40.00 and more along the way to $50.00. To answer your question can it run to $50.00 the simple answer is yes but not without effort. Management has focused its attention on growth in wealth management which leans heavily on continued strength in the equities markets. The all time high for SLF is near $55.00 which was hit in late 2007.

The six-month chart illustrates the support along the 50-day moving average and the buy and sell signals generated by the MACD and the RSI. What you might want to consider with your position in SLF are selling covered calls. You own a nice position and enjoy the dividend. The premium from the call options would juice your returns. I would advise seeking advice from an expert in that area of the investment universe.

At this point, I don’t see a reason to shoot this running horse but that doesn’t mean put it in a box and forget about it.

Make it a profitable day and happy capitalism!

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

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