Jeff Parent, chief investment officer at Castlemoore Inc.
Focus: Technical analysis

MARKET OUTLOOK

It’s very possible that we’re at the beginning of a bear market. The large two-day drop we saw between Oct. 10 and 11 was well above average and broke major trendlines. The slide continued down to the February-April support, where we’ve had a minor bounce. If the support on the S&P 500 at 2,627 can hold, then we’ll be more optimistic.

Don’t be confused by strong bullish days. In the 2008-2009 bear market, about half of all trading days were positive, with many daily gains being more than 5 per cent. To add to the current situation, it has been a very difficult year: earnings are like a minefield, tradeable trends have been difficult to find, investors are being whipsawed and even the strong tech has topped off. We’re entering a seasonally strong period, but caution is required. Cash levels should be high until support is confirmed. Be willing to sell at a loss.

TOP PICKS

WEST FRASER TIMBER (WFT.TO)

Most construction-related companies have taken a serious blow. It looks like it’s time to buy now that support looks stable. The buying signal is based on a reversal confirmation last week. Good volume turnover helps. Potential is for a $5 to $10 increase. Reduce or sell below $67.

STANLEY BLACK AND DECKER (SWK.N)

Another construction-related company that went into deeply oversold territory. After losing 36 per cent year-to-date, support was found at $108. There is potential for a pullback to $115. It could go to the low $130s before heading into resistance. Sell below $110.

COSTCO (COST.O)

Costco is a good relative performer, along with other discount stores. Fits into the consumer staples category and may be considered a defensive stock. Expectation is to get above $235. I would sell below $219.

PAST PICKS: APRIL 10, 2018

KEYERA (KEY.TO)

Keyera seems to be somewhat stable, although it is trading at a low level. It is OK to hold for the dividend, but it would be a sell below $31.50. Upside is limited by a large wall of resistance.

• Then: $34.83
• Now: $32.45
• Return: -7%
• Total return: -4%

WELLS FARGO (WFC.N)

Wells Fargo is trading at a long-term average price and I wouldn’t expect much movement in either direction. Strong support at $50.50 needs to be held. OK for the dividend.

• Then: $52.62
• Now: $54.15
• Return: 3%
• Total return: 4%

GRAY TELEVISION (GTN.N)

A special situation is giving this company a strong outperformance during the downturn, but it looks like it’s topping out. I would hold until it drops below $16.20.

• Then: $11.85
• Now: $17.58
• Return 48%
• Total return: 48%

Total return average: 16%

WEBSITE: www.castlemoore.com