Stock Picks: Cincinnati Financial and Dominion Energy

The S&P 500 (SPX) went as high as 2,653.55 yesterday, April 9, 2018, before succumbing to selling pressure and closing the day at 2,613.16. With this price action, it appears that the index is now facing resistance at 2,650. Bulls need to go above this level to relieve selling pressure.

As bulls work hard to stay above 2,600, let’s look at stocks that are near firm support levels.

CINF – Cincinnati Financial Corporation

Cincinnati Financial Corporation is a Fortune 500 insurance holding company. Incorporated in 1992, it offers property and casualty insurance through a family network of insurance and financial services subsidiaries including The Cincinnati Insurance Company, The Cincinnati Indemnity Company and The Cincinnati Casualty Company. The company’s five operational segments are commercial lines insurance, personal lines insurance, excess and surplus lines insurance, and life insurance and Investments.

Technical analysis show that CINF appears to be creating an ascending triangle pattern on the weekly and daily charts with the breakout point at 78. While the stock breached the resistance in August 2017, volume was lacking. The stock needs to print over 2.5 million in volume as those who bought the bottom are likely to lock in gains when bulls try to make another attempt at breaching 78 resistance. The stock needs buyers to absorb the selling pressure.

In addition, fundamental analysis show that the trailing twelve months (TTM) price to earnings ratio (PE ratio) of CINF is 11.61. The low PE ratio tells us that the stock may not be fairly valued as its five-year average has been 17.12. The price of the stock might increase based on the PE ratio because stock prices usually catch up with the company’s earnings.

The strategy is to buy the breakout at 78 as long as the volume requirement is met. If bulls successfully complete the breakout, they will use it to create a base and move to our target of 88. The process may take less than three months.

Weekly CINF Chart

Monthly CINF Chart

As of this writing, the Cincinnati Financial Corporation stock is trading at 72.77.

Summary of Strategy

Buy: Breakout at 78 as long as the stock prints over 2.5 million in volume on the daily chart.

Target: 88

Stop: Close of 75 after the breakout.

D – Dominion Energy Incorporated

Dominion Energy Incorporated is an S&P 500 company that produces and transports energy. Incorporated in 1983, its asset portfolio includes approximately 26,400 megawatts (MW) of generating capacity, 6,600 miles of electric transmission lines, 57,600 miles of electric distribution lines, 14,900 miles of natural gas transmission, gathering and storage pipeline, and 51,300 miles of gas distribution pipelines. The company’s subsidiaries include Virginia Electric and Power Company (Virginia Power) and Dominion Gas Holdings, LLC (Dominion Gas).

Technical analysis show that D has broken support of 68 on March 28, 2018, and it is well on its way down to support of 65. This level is one of the issue’s strongest support. D has respected it since January 2014. More importantly, the stock has been generating extremely high volume in the last four weeks. This suggests that bulls are coming out to defend the support.

Furthermore, fundamental analysis show that D’s trailing twelve months (TTM) PE ratio stands at 14.06. The stock has some room to grow because its average PE ratio (TTM) in the last five years has been 35.87.

The strategy is to buy as close to 65 as possible. If bulls hold on to the support, they may use it to climb to our target of 76. The process may take six months.

Weekly D Chart

Monthly D Chart

As of this writing, the Dominion Energy Incorporated stock is trading 66.37.

Summary of Strategy

Buy: As close to 65 as possible.

Target: 76

Stop: 62


Featured image courtesy of Shutterstock.

Kiril is a CFA Charterholder and financial professional with 5+ years of experience in financial writing, analysis and product ownership. He has passed all three CFA exams on first attempt and has a bachelor's degree with a specialty in finance. Kiril’s current focus is on cryptocurrencies and funds, as he does his own crypto research and is a Product Manager at Mitre Media. He also has his personal website, where he teaches people about the basics of investing. His ultimate goal is to help people with limited knowledge of finance and investments to create investment portfolios easily, and in line with their unique circumstances.