Technical Analysis: Three Trading Ideas for this Week

5i Staff Jan 22, 2018

Three Trading Ideas for the Week

New Flyer Industries (TSX: NFI)

New Flyer Industries (NFI-T) has given a textbook trend following a signal. Price action spent the last eight months consolidating within a cup & handle continuation pattern before breaking out to new all-time highs.

Often people find it hard buying stocks at all-time highs. To show the potential of this type of breakout below, I included a chart of The Stars Group (TSGI-T), which in November had a very similar continuation pattern and breakout to what we are currently seeing with New Flyer. The Stars Group has since went on to yield approximately a 20% return.

View 5i's full report on New Flyer Industries in the member area here. If you're not currently a member, you can view the full report for free, by signing up for a 1 month free trial.

New Flyer Industries Stock Performance vs Stars Group

Great Canadian Gaming (TSX: GC)

After gapping up in August, Great Canadian Gaming (GC-T) spent the last 5-months consolidating within a cup and handle continuation pattern. Price action went on to close last week at a new all-time high. This is also a textbook trend following signal.

To show the power of this type of setup, below I included a chart of Avigilon (AVO-T) which in August had a similar gap up to a consolidation pattern before momentum kicked in. Since, Avigilon went on to yield a 30+% return.

View 5i's full report on Great Canadian Gaming in the member area here. If you're not currently a member, you can view the full report for free, by signing up for a 1 month free trial. 

Great Canadian Gaming Stock Performance vs Avigilon

Kinaxis (TSX: KXS)

In my last blog post I featured the bullish rounded bottom pattern setup of both Kinaxis (KXS-T) and Ag Growth (AFN-T) on their weekly charts. Ag Growth has since broken out to new all-time highs. Kinaxis continues to consolidate in a tight trading range.

Watch for a breakout as periods of low volatility are often followed by periods of high volatility. This type of setup has the potential of being very explosive. Ag Growth is a prime example of how explosive the breakout can be, yielding 11% in the last 3 weeks since the breakout.

View 5i's full report on Kinaxis in the member area here. If you're not currently a member, you can view the full report for free, by signing up for a 1 month free trial. 

Kinaxis and Ag Growth Stock Performance

Remember to view 5i's answered questions on these companies here. If you are not yet a member, get your free 1-month access here (no credit card required).

By Dwight Galusha from SetYourStop.com

The author currently does own NFI and KXS from the stocks mentioned above.

Nothing in this article should be deemed as a recommendation to buy or sell securities and is for informational purposes only. Please do your own due diligence before making an investment decision.

4 comments

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Diane
Feb 16, 2018
Hi team

What do you thing of CNR? Is it dangerous to buy it now knowing that it maybe influenced by NAFTA
Diane
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Elmer
Jan 23, 2018
I own two of the three featured here, namely KXS and NFI. Both have been done well 'til now. If the analysis here is correct, I'm in for a bonus. At my age (80) I'll take all the good fortune that comes my way. Your service to members is truly valuable in so many way.

Elmer
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Dwight
Jan 23, 2018
Hi Neil. Thank you for the question. In theory you are 100% correct. Although when trading in real-time we rarely get a technical pattern to form as described in a textbook. There is a misconception about technical analysis that there are magical patterns that should always result in a specific way. Most of the technical patterns taught in textbooks were created before the market was dominated by algorithms, high frequency trading firms, dark pools and a multitude of alternative trading systems for matching orders. What retail investors often do not realize is a majority of time chart patterns do not pan out like they are supposed to. The stock market is not meant to be easy. The market has one job, and that is to make as many participants to look as foolish as possible. Professional traders and algorithms take advantage of these conditions by using dynamic regression as opposed to linear regression. I whipped up a quick blog post explaining the difference. I really hope this helps. LINK TO BLOG POST - https://setyourstop.ca/chart-patterns-dynamic-regression-vs-linear-regression/
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Neil
Jan 22, 2018
Dwight. Thanks for your above analysis. However, while the formations you allude to above may well be bullish, I would have to question your use of the 'cup and handle' phrase. Nowhere have I seen it before suggested that a 'handle' can make a new low. It has long since failed as a handle. Also, my understanding is that for a 'cup' formation the right side of the cup must neckline to the left side. If this is correct, I would submit that you have mislabelled the formations as your examples do not meet these criteria. O'Neill was the first I am aware of to discuss the cup and handle in detail. I certainly stand to be corrected and would appreciate you comments as I continue to try to learn t.a.
Thank you
technical stock analysis Great Canadian Gaming Kinaxis New Flyer Industries