Trade Recommendation: Intact Financial
- Since double-bottoming in 2008 and 2009 at $26 (violet horizontal trendline in Figure 1), Intact Financial (IFC.TO) has enjoyed a four-fold increase. During the 2013, 2016 and 2018 corrections, the stock found support at a long-term trendline (support – green trendline; retests – green arrows).
Figure 1. IFC.TO Weekly Chart
- Zooming in, after topping in November’17, IFC completed a H&S pattern (tops – yellow ellipses, neckline – yellow trendline in Figure 2).
- In January, March, April, and May, all up-moves halted at a well-defined short-term resistance (red trendline). Yesterday (May 25), the stock managed to break and close above the resistance.
- Today, the stock closed in positive territory, whereas the Financial sector (TTFS.TO) declined by over 0.5%.
- The $95 level had served as support on multiple occasions in 2018 (purple horizontal trendline and arrows).
Figure 2. IFC.TO Daily Chart
- The bounce off of the long-term support and the break above the short-term resistance are considered constructive.
- The stock is expected to find support in the $95 – $96.50 range during pullbacks (i.e. at the red and purple trendlines).
- The downward target from the H&S pattern was nearly met during the May decline (target – $92.25 – white vertical trendline in Figure 2, May 9 low – $92.65 – last purple arrow).
- Short-term bullish as long as the stock remains above $95
- Long-term bullish as long as the stock remains above its long-term support (green trendline in Figure 1).
- Buy the stock at current levels ($97.50 at EOD on May 24).
- Target: Half at $101 (the January low which served as resistance in March – second red arrow). Other half at $108 (origin of the late 2017 decline).
- Stop: Half upon a close below $95. Other half upon a close below the long-term support (currently at approximately $93.50).
Disclosure: No position yet but may initiate at any time. Will likely recommend the stock to my clients as a potential play within the financial sector.
Featured image courtesy of Shutterstock.