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TORONTO (GlobeinvestorGOLD) — For the avid betting man or woman, Golf Town Income Fund — currently yielding 9.29 per cent annually — may present an interesting speculative investment, according to technical charts.
While its attractive annual cash distribution of $1.05 a unit may interest those seeking high-income alternatives, investors should note that the company pays out 100 per cent of its cash flow. According to Golf Town CEO Stephen Bebis, however, "this isn't a problem for three reasons: Golf Town has been profitable since it began in 1998, it has a significant line of credit, and it plans to add two or three new stores a year, which will immediately boost cash flow." The next distribution is slated for June 15, for unitholders of record on May 31.
Founded in 1998, Golf Town is the largest retailer of golf merchandise in Canada and currently operates 23 stores across the country. The company went public as an income fund on Nov. 12, 2004.
Although there isn't much history to evaluate, technical analysis does reveal that the recent sell-off may offer an interesting opportunity. After rallying 32.5 per cent from its initial offering price of $10, the share price retraced 61.5 per cent of the advance and found support. This is significant in that it falls within the classic Fibonacci retracement pattern of 61.8 per cent.
Furthermore, the share price found support from the lower oversold Bollinger band and retested a hammer bottom found in early March. Additionally, the moving average convergence/divergence oscillator (MACD) exhibited a positive divergence on the most recent sell-off. Although the share price traded lower in May than in April, the MACD did not confirm the lower price, suggesting a low was in place and higher prices could be anticipated.
The income trust appears to have traced out a symmetrical triangle, which is a continuation pattern and represents a pause in the existing trend. On occasion, as in this case, you may have a short-term false breakdown, but once the unit price rallies back above the downtrend line, you could expect a resumption of the rally. Once overhead resistance at about $11.75 is overcome, a rally to the pattern's technical measurement of about $13.75 over the next three months could be in the works.
In Canada, when you need of sports equipment, leisure, automotive or household products, chances are thatCanadian Tire is one of your destinations. It looks like investors are putting it on their list as well. The stock has been trading in a positive trend channel over the past five years with the slope having actually accelerated to the upside over the past two years.
At the moment, however, the MACD and a moving average crossover to the downside indicate that a short-term sell signal is in effect. While the lower Bollinger band at about $58 may offer temporary support, the stock could pull back to the lower positive trend channel at $56 before the correction is complete. The stock appears to be in an extended third impulse wave of a five-wave, Elliott Wave numbered, advance pattern. The trend channel's technical measurement suggests a possible target of $70, which could potentially be the top before an Elliott Wave corrective phase sets. Once the target is reached get ready to take a vacation from the stock, as the correction following the fifth wave advance could be lengthy and severe.
Yola Edwards is a contributing writer and technical analyst for Bell Globemedia Interactive, providing options and technical analysis research on a variety of North American equities.