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If you read my blog often you probably know that I normally focus on long picks, so, don’t be scared, there’s always a strong up trend somewhere so long as you are playing the right sectors. Don’t believe me? Check out these strong picks?

Good luck to you.

I have received recently received an email from my friend Jr regarding my position on BNS (Bank of Nova Scotia). His question on the following chart for BNS.TO – Should one sell the stock now that it’s broken the support at 48 and make a 3 bars Lower Low? The area in question is highlighted.

Everyone has a different method and what I will explain here might not fit your style, I’m a “short term swing trader”, meaning I want to explore movements that last anywhere from 1-5 days (in most cases) – I will hold longer if I feel the trade has more potential and after I’m able to move my stop to break-even.

Now, back to BNS. When evaluating a stock I usually ask the following questions:

• What’s the long term trend?
• Is the stock historically oversold?
• How does it compares to it’s peers?

Let’s try answering some of these questions for BNS using charts.

What’s the long term trend for BNS? for long term analysis I usually use the Weekly chart. Given the recent market drop, BNS looks strong. Note how it bounced back from Dec-Apr and rapidly attacked the previous support breakdown at $50.00 – it looks like it’s consolidating at this point.

Is the stock historically oversold? I normally use bands for that purpose. The following charts shows BNS and how it reacted to band-stretches in the past… It looks very oversold at this point and it could snap-back – I’m not saying it will reverse the trend  and go up, I’m saying it could possibly bounce back, short-term… that’s what I do right? I explore short-term opportunities. Now, please visualize the chart below and next look at the previous chart… below it looks like a nightmare, support broken, etc… above, just a normal consolidation after a strong bounce back from support (or, what I normally call – Failure to Drop).

How does it compares to it’s Canadian and US peers?

Canadian Peers – BMO, RY, TD and NA

US Peers – C, JPM, BA – Ouch, that’s ugly…

In summary, BNS is amongst the strongest in Canada (chart-wise) followed by TD and NA and I think it’s worth keeping it for now. I feel the market could bounce short term anytime now.

Good luck to you.

My plan has been working so far on JPM, trade is up nicely since 3 days ago. I’ve got a “green” bar which usually keeps me in the trade. This is a short term bounce, the stock is NOT reversing yet.

Daily Chart

Hourly Chart