Keith Richards, president and chief portfolio manager at ValueTrend Wealth Management
Focus: Technical analysis

MARKET OUTLOOK

ValueTrend's strength lies within an environment of volatility. We not only survive volatility when others flounder — we thrive in it. Despite markets barely over their January highs, we're well ahead of the North American Index this year. We’ve achieved this outperformance with less volatility, via our 20 per cent cash components and a strong sector rotation strategy.

Some examples of our rotation include a move into stocks trading in the bottom of a sideways pattern (technical support), and selling out of positions that are trading near the top of their technical range. Positions bought on strong pullbacks include today's three Top Picks. All three stocks are range-bound positions that we've traded in and out of in the past. While buying into the stocks noted today (amongst others), we rotated out of stocks within the consumer staples and energy sectors as they neared the top of their respective trading ranges.

We have a list of stocks that we expect to find opportunistic buy-points in the coming weeks. As my son's old hockey coach used to yell at the boys: “Keep an eye, guys, keep an eye!" I concur. Opportunities will present themselves to take profits and move into new stocks in the coming weeks. We just need to “Keep an eye."

TOP PICKS

SNC-LAVALIN (SNC.TO)

We sold SNC at the top of its trading range late last year right around $60. We’ve done that trade twice before, having entered in the low $50s both times. Well, here we go again. We just bought the stock a couple of weeks ago at $51.90. We expect to sell it as the political environment surrounding their Middle Eastern contracts subsides. We’re looking for a $60 or close to it again as a sell point.

BCE (BCE.TO)

Again, a stock we've traded a couple of times in the past. We just bought in at $53. We think the stock will go back to the $60 zone, which is where we have sold it in the past. The stock pays a nice dividend while you wait for the trade target.

MANULIFE (MFC.TO)

Support on this stock lies just under $23, which is where we recently picked it up. Resistance is in the mid-high $20s, with a potential target of $27. Like BCE, a good trader, with a dividend while you wait.

PAST PICKS: JULY 9, 2018

CONSUMER STAPLES SELECT SECTOR SPDR FUND (XLP.N)

Just sold it as it nears the top of its trading range around $55. It’s now seasonally time to get out of the sector as well.

• Then: $52.02
• Now: $53.92
• Return: 4%
• Total return: 4%

FAIRFAX FINANCIAL (FFH.TO)

Still hold it, sell target is mid-high $700s (somewhere near $770) which is where four-year technical resistance lies.

• Then: $724.00   
• Now: $711.74
• Return: -2%
• Total return: -2%

CASH

We are still 20 per cent cash, which is a Goldilocks level in our opinion. September and October can be volatile, but markets are acting sell (more so on the U.S. side), so we want exposure to stocks. But, it’s good to have some cash in the bag should a selloff occur in the less favorable seasonal months.

Total return average: 1%

WEBSITE: valuetrend.ca