The Transparent RRSP: Relative Strength

The Week of August 14
  • On Wednesday, August 16th, I bought 100 shares of Bombardier (BBD.B.TO) at $2.65 per share.
  • With $1 in commissions, the whole purchase was $266.00. I now have $18.47 in cash in the RRSP account.

I actually meant to buy the shares on Tuesday, but I totally forgot to put in an order! So, on Tuesday night, I put in a limit order to buy 100 shares at $2.68, a couple of cents above the current bid/ask price. I was peeved by my sloppiness, but I’d been stalking this stock all month, watching it against the market. I wanted it that badly that I was willing to pay more than I knew I should have.

Thankfully, on Wednesday, my order was filled at the lower price of $2.65! This happens sometimes; other times it can go the other way and your order will be filled at a much higher price. It’s called slippage when you get filled at a higher price than what you have on order. Slippage tends to happen more when stocks are lightly traded. Bombardier is a heavily traded stock, so slippage is less likely to happen.


Let’s do some chart analysis!

 

BBD analysis

Price charts for BBD.B and XIC on freestockcharts.com

On Chart #1, the pink arrow shows the day I bought BBD.B. No special day and it closed negative. On Chart #2, the pink arrow for the XIC market ETF shows the market on the day I bought BBD.B.

The blue arrows on both charts #1 and #2 show how they closed for the week. BBD.B closed more positive than the market did, showing relative strength. There’s been uncertainty in the overall markets in general with the possibility of war — and then you add violent protests and terrorist attacks to the mix and you get even more negativity. I hope this little stock, along with the rest of the RRSP portfolio (come on, LIQ!), will show resilience in the face of all this.

Chart #3 is the weekly chart for BBD.B. It’s a healthy looking chart with a very bullish setup. (If you’re not familiar with the market lingo, bullish means optimistic and positive because apparently, bulls look up when they’re in attack mode; bearish means negative and pessimistic because bears look down when they’re about to pummel you. There could be more to the meaning of these terms, but all that matters is that you get the picture.)

Chart #4 shows a lot of potential for BBD.B to move up if and when it gets past the previous price resistance points as seen on that pink dotted line.

Of course, all of this can go potty — regardless the relative strength and bullish setups — if the overall markets get really negative and there are more sellers than buyers. No matter what, just try to stay positive and strong!

 

Your Special 4/20 Newsletter: Medicinal Stocks


v2 420A friend’s mother once asked me and my man what would be a good cannabis company to invest in as she wanted to buy stocks of that sort. This question caught us off guard–it was almost as if this sweet retiree was asking us where she could get good weed. She clarified that she wanted to invest in a company that was mainly in the business of medicinal cannabis. Oh medicinal! But of course. Her interest came about after Colorado and Washington legalized marijuana use. T
his is actually a question I get asked a lot as more people anticipate widespread legalization. I’m sure many other stock investors are asked about cannabis companies frequently, or at least from time to time (right?). For any new and exciting industry, who doesn’t want to profit from getting in early? With all the talk of legalization in Canada, the stigma of marijuana’s medicinal and recreational use will fade, or at least its reputation will be less shady. If and when this happens, you’re better off having seized such opportunities sooner than after the industry has boomed and the stocks have become more expensive.

The research we conducted for ‘Ma’ was actually difficult because many of these cannabis companies looked similar to one another. Many of them were a bunch of small businesses that came together to form a larger company; many outlined plans to dominate all corners of the cannabis market from production and retail to medicinal research and pharmaceutical use; most were quite new in the stock market; the stock prices were cheap and in similar price ranges; and they all promised expansive growth–in both the corporate and hydroponic sense. There is typically more speculation with younger companies; what’s interesting is that many of these cannabis companies are in a newer and developing industry that is slowly gaining acceptance and becoming incrementally less illegal.

As one who looks at a lot of stocks, I am always suspicious of hype and headlines. This is because I often find that by the time the news gets announced, it’s too late–the best buying opportunity has passed. Before I buy any stock, I like to look for clues first within the sector and the economy. Is the hype over? Is there an important upcoming meeting or announcement by the government that will affect this sector? Is the sector more stable and less volatile than the overall stock market? Or is the sector overheated and likely going to experience a bit of a sell-off? Will a company be announcing its quarterly earnings soon? I consider these things in addition to checking out a company’s fundamentals that point to a solid foundation, such as healthy financial data, plans for future expansion, and developments in products and services. Then I check if a company’s stock price has stabilized and I try to anticipate what might be a good price to get shares at in the near future. 

There are many cannabis companies in Canada. I took a look at some companies that trade on the TSX Venture Exchange (the stock exchange for newer and smaller Canadian companies):

Canopy Growth Corporation | Ticker symbol CGC.V | Price per share at today’s open: $2.60

Aphria Incorporated | APH.V | $1.56

OrganiGram | OGI.V | $1.10

Mettrum Health | MT. V | $1.66

Emerald Health Botanicals | EMH.V | $ 0.17 

I’ve got my eye on a couple of these companies. I won’t buy too many shares, I don’t want to risk much, but like Ma, I don’t want to miss out either. I’m willing to risk a bit of money to hopefully enjoy significant gains later. Before the end of the trading day today, on this celebrated date of 4/20, I will probably buy my shares of legalized cannabis.