Scotiabank Opportunity
A Technical Overview
The Bank of Nova Scotia (BNS), also known as Scotiabank, is a Canadian multinational banking and financial services company. Amongst Canada’s Big Five banks, it is the third-largest Canadian bank by deposits and market capitalization.1 Its membership in Canada’s Big Five is important to note because they control about 90% of the Canadian banking system. These banks are protected by regulators from competition, which ensures their profitability, and they are also highly regulated. From a risk point of view, they are very low risk.2 However, this isn’t their claim to fame. Scotiabank’s claim to fame is that it has not cut its dividend for 190 years. Buyers today will enjoy a >7% dividend yield as they wait for the stock price to recover. On the technical side, the stock has been consolidating near the pandemic lows and dotcom bubble/Great Financial Crisis.
As you can see in the monthly chart above, the stock has been trading within a well-defined channel since the early 2000s. The stock is currently consolidating near the $40 support, which was the previous consolidation zone after the pandemic.
Zooming into its current price action on the weekly chart, we can also see that the stock is seeing resistance from a trendline that extends from August 2022 and an even shorter-term resistance trendline from October 2023. I expect the stock to bounce between the $40 support and $45 resistance as it searches for bullish catalysts, like a rate cut, before breaking out.
What I find most interesting is the fractal that the stock has been tracking for the last 2 years.