The banking sector has, by and large, been out of favour since the global financial crisis in 2008, but investors can look beyond such generalisations to find opportunities, if they use the right tools.
This week the Victorian president of the Australian Technical Analysts Association, Paul Ash, casts his eye over a second-tier player, Bendigo and Adelaide Bank, and finds it an interesting proposition.
Bendigo's share price has taken a dive from February this year, reaching a low of $6.82 in late May. Ash looks at the situation using three important indicators from the technical analyst's armoury, all of which would have shown that the first half of the year was not the time to buy the stock.
First, the 30-day moving average was pointing downwards, a sign of weakness.
Second, the blue trend line was running down and remember, as they say in the markets, "the trend is your friend".
Third, signs of consolidation in March and April, under which he drew the horizontal support line, were shown to be a false dawn in May when the stock plunged to its low point.
Things turned around in June, and those signs have become positive. Both the trend line and the 30-day moving average are moving up and the share price has broken through the old support line at $7.42, which had turned into a resistance level once the stock fell through it. Since breaking through that resistance, the stock has risen by 9.9 per cent to its present level. The next resistance level will be at the February high of $8.30 and Ash says to keep your eyes peeled to see if Bendigo breaks through, which would be a further sign of strength.
Bendigo has a healthy fully franked dividend yield of 7.3 per cent, more than you can earn on deposit with the bank.
Earnings per share are expected to have fallen slightly in the year just past, and to rise in 2013.
The bank emerged from the old Bendigo Building Society in 1995 and merged with Adelaide Bank in 2007.
It has almost 900 outlets, including 190 company owned branches and 275 community banks, owned by the communities in which they operate.
This column is not financial advice.
rodmyr@gmail.com
Frequently Asked Questions about this Article…
What happened to Bendigo and Adelaide Bank share price in the first half of the year?
Bendigo's share price fell sharply from February, hitting a low of $6.82 in late May before staging a recovery in June according to the article.
Which technical indicators did Paul Ash use to assess Bendigo and Adelaide Bank stock?
Paul Ash looked at three technical indicators: the 30-day moving average, a blue trend line (the overall trend), and horizontal support/consolidation patterns — all of which showed weakness in the first half of the year before turning positive in June.
What signs indicated a technical turnaround for Bendigo and Adelaide Bank?
The turnaround signs were that both the trend line and the 30-day moving average started moving up in June, and the share price broke back above the old support level at $7.42 (which had become resistance). Since breaking that resistance the stock had risen about 9.9% to its then-present level.
What are the important support and resistance levels for Bendigo shares mentioned in the article?
The article identifies $7.42 as a key former support level that turned into resistance and notes the next resistance to watch is the February high at $8.30.
How attractive is Bendigo and Adelaide Bank's dividend yield for everyday investors?
Bendigo had a healthy fully franked dividend yield of 7.3% at the time of the article, which the column points out is more than typical bank deposit returns, making it noteworthy for income-seeking investors.
What does the article say about Bendigo and Adelaide Bank's earnings per share (EPS) outlook?
The article says earnings per share were expected to have fallen slightly in the most recent year and were forecast to rise in 2013.
What is Bendigo and Adelaide Bank's background and branch footprint?
According to the article, the bank evolved from the old Bendigo Building Society in 1995, merged with Adelaide Bank in 2007, and operates almost 900 outlets, including about 190 company-owned branches and 275 community banks.
Is the commentary in the article financial advice and should I buy Bendigo stock now?
The article explicitly states that the column is not financial advice. It highlights technical signs of strength and dividend yield, but it does not recommend buying; everyday investors should consider their own research or speak to a licensed adviser before making investment decisions.
Call 1300 880 160
Start a chat
Schedule a call
