Hi Lou,
Could you please do an analysis of CIBC. I'm wondering if it's time to take some profits as it is around the last high of $78. The dividend is great but I don't want to ride it back down.
Thanks,
Susan
Hey Susan,
Thanks for the assignment. Your situation is not uncommon. You like the income but want to hold onto your capital gains. The best strategy is to look for signals that can help you capture gains when they are available and get back on the ride at lower prices. Canadian Imperial Bank of Commerce offers a generous dividend of 4.866 per cent which it just increased in August. The company also announced a share buyback that will help drive more value into the shares.
An examination of the charts will provide some guidance as to how best to proceed with your investment.
The three-year chart depicts a stock that has been range bound since June of 2011. At the lower end of the range there is support at $70.00 and resistance comes in at the upper end of the range at $78.00. Given the sideways pattern with slow oscillation within the range I can see why you are anxious to make a decision. Worth noting are the signals generated by the RSI and MACD in late August of 2012 indicating that selling pressure was building.
The six-month chart provides a close-up of the gap down that has transpired in the last week of September of 2012 which I am sure is the burr under your saddle. The MACD is clearly indicating a retreat as is the RSI. The golden cross on the chart might have to be ignored as over the last year and a half it has not indicated that a sustained uptrend was developing. Finally it appears that the uptrend that started in July has been broken.
With the evidence at hand I think you should go with your gut and throw to cash. Look to get back in at the lower end of the range where your additional purchasing power will allow you to own more of this dividend producing machine.
Make it a profitable day and happy capitalism!
Have your own question for Lou? Send it to lschizas@globeandmail.com.
Lou Schizas