Hi Lou: After the Paris air show, the market is dead quiet about this company. Have you heard anything about the C Series? Please give me your take of this company's future. Many thanks, Vince
Thanks for the assignment. This will be the fourth time that I undertake a case study for Bombardier Inc. The last time was on Feb. 10, 2012, on a request from William. The shares were trading for $4.79 and William wanted to know if it was time to buy. The shares had bounced off support at $3.50, but were approaching resistance at $5 and along the 200-day moving average. It was advised to be patient and wait for a breakout above $5 before buying. Retrospectively, that was the right call.
The stock didn't have enough in it to move higher and by the end of February, 2012, it began a retreat that lasted until late November when it traded down to its 52-week low of $2.97. From there it began a new advance to its current level. Another examination of the charts will help inform your decision on how best to proceed with this investment.
The three-year chart confirms the observation made in 2012 that Bombardier is not a buy and hold stock. You have to trade this one for profits by finding entry and exits points that work in your favour. You asked about the C Series jets that the company has developed. They didn't announce any orders at the Paris show and had to push back the maiden flight of the jet until late July. Also keep in mind there is competition in the space for this type of aircraft so expect a real donnybrook when it comes to filling the order book.
On a technical basis there is resistance coming in at $5, but the uptrend line has not been breached and support along the 50-day moving average has held. Finally the golden cross that formed in February, 2013, signalled that buyers were still eager to step up to the plate for this stock.
The MACD and the RSI on the six-month chart created a generous buy signal in April when the stock was trading for approximately $3.90. The momentum indicators also generated a sell signal in June as the shares approached $5 and they are currently indicating a pullback. If Bombardier can move through $5, it could advance to $5.75.
For my money the stock doesn't offer enough incentive to rate a buy. Bombardier has been a choppy trader and I am not convinced the C Series is the dog that will save the company.
Make it a profitable day and happy capitalism!
Lou Schizas