Toronto Dominion Bank (TD:NYSE)
Price at Preparation: $56.81 (May 20th, 2024)
What they do
Toronto-Dominion Bank (TD:NYSE) offers financial products and services. It operates through the following segments: Canadian Personal and Commercial Banking, U.S. Retail, Wealth Management and Insurance, Wholesale Banking, Corporate. The Canadian Personal and Commercial Banking segment engages in the provision of deposit, saving, payment, and lending products and advice. It also offers customized products and services to help business owners meet financing, investment, cash management, international trade, and day-to-day banking needs through its network of commercial branches and specialized customer centers. The U.S. Retail segment focuses on personal, business banking, and wealth management operations in the U.S. The Wealth Management and Insurance segment offers wealth and asset management products and advice to retail clients in Canada through the direct investing, advice-based, and asset management businesses. The Wholesale Banking segment serves corporate, government, and institutional clients in key financial markets around the world. The Corporate segment consists of service and control groups, including technology solutions, shared services, treasury and balance sheet management, marketing, human resources, finance, risk management, compliance, anti-money laundering, legal, real estate, and others.
Welcome to this week’s Theta Bandits: Top Pick Tuesday. We strive to bring you free content, which is based on current market conditions, used to spot new potential winners. This week we have turned our attention to the banking sector with TD, which some of you might recognize from using the “Think or Swim” trading platform – let’s have a look!
Opinion
Unfortunately, Toronto-Dominion Bank (TD:NYSE) has had some recent bad news, which led to a price drop from which the stock is recovering and is likely one of the reasons for the wide gap in the 12-month Price Targets set out, with a downside low of -4.28% at $54.38 USD, an upside high of +20.3% at $68.34 USD and an upside average PT of +12.5% at $62.91 USD. Even with such a big gap, the banking sector is on solid footing with current lending rates still high and even though this stock is in recovery mode, TD does pay a 5.08% (or $0.751 USD per share) dividend quarterly which will definitely help boost total return while waiting for the price appreciation on the stock recovery. This double-whammy is a big reason to evaluate this stock as a potential position in any portfolio.
As with any stock, the market is never a “sure thing” as pointed out above this stock does have some short-term risk associated – make sure when evaluating this stock that it does fit your personal risk profile.
Plan
As usual, follow along with the visual aid below, where the following is highlighted: In blue – the 52-week high. In red – the 52-week low and a potential cut target. In green – the 12-month PTs (low, avg, high). In orange: support/resistance lines. In yellow – our potential plan.
From the recent 52-week low of $54.12 USD in May 2024 a nice recovery has begun. We are headed into an earnings report (ER) on May 23rd, 2024. This will make the stock volatile for a few days; the more conservative approach would be to wait for this event to pass and then plan around the reaction to the ER as the price could jump or give us a better entry point. In previous articles the mechanism of legging-in to a position has been discussed as a method of Dollar Cost Averaging (DCA), which is always prudent on stocks with volatility.
Post ER and the stock is moving, the orange lines marked show support/resistance areas which are good guides to follow. Since there should be some price appreciation based on recovery from the news event mentioned, stronger resistance lines have been identified by looking at the history over the past year and used as target zones to aim at profit on the trade. At support/resistance lines remember to secure profit or raise stop loss triggers to mitigate the risk of a trade going wrong. If the price falls below the “cut” support line marked in red, this would indicate the trade has gone the wrong way and to potentially cut losses and move to the next trade idea.
For more content consider our Theta Bandits Discord community, a hub for traders to ask questions, share ideas and strategies like the approach above for this and various other tickers daily. Traders in this community could have attacked this or similar positions in the sector, using other methods discussed here and in previous Top Pick Tuesdays.
RISKS
Remember that the goal is to grow capital, so the key is to both secure profits and limit losses as discussed above. Make sure to plan your trade with-in your risk tolerance and give the trade the time required to be successful, while setting and updating limits and exit points to mitigate risk.
If you liked this, drop us a comment in the discord – We read them all!
Disclaimer: This article is for informational and educational purposes only, not investment advice. We recommend researching and consulting with a financial advisor before making investment decisions. All actions based on this information are at your own risk.
