Bullish on $BMO and Canadian banks

2 Ara

Key Stats

• Market Cap: CAD 97 billion
  
• P/E Ratio: 15.45 (Sector avg: 11.8)
  
• Dividend Yield: 4.6% (reliable passive income)
  
• Next Earnings Date: Dec 5, 2024
  
• Last Upgrade: Maintained "Buy" by RBC with price target CAD 155 (Dec 2024).
  

Technical Reasons for Bullish Outlook

• Golden Cross Formation: The 50-day moving average recently crossed above the 200-day moving average, indicating long-term bullish momentum.
  
• Strong Support Zone: BMO has consistently rebounded off demand levels, forming a solid base for upward price action.
  
• Positive Divergence in RSI: RSI trending higher despite sideways price movement suggests accumulation by institutional players.
  

Fundamental Reasons for Bullish Outlook

• Interest Rate Environment: Higher interest rates boost net interest margins, directly benefiting BMO’s profitability.
  
• U.S. Market Expansion: Strategic growth in the U.S. through recent acquisitions increases revenue diversification and growth potential.
  
• Strong Dividend Track Record: BMO's 4.6% yield underscores stability, appealing to both growth and income-focused investors.
  

Potential Paths to Profit
Option 1: Lowest Risk - Buy Shares
Purchase shares at the current price. Collect quarterly dividends while riding the momentum toward CAD 160.

Option 2: Medium Risk - Buy Call Options
Consider June 2025 $130 calls (estimated premium: CAD 5.00). Leverage potential for higher returns with manageable upfront risk.

Option 3: Income Boost - Covered Calls
Buy shares and sell March 2025 $140 calls. Capture premium income while profiting up to CAD 140 if called.


Disclaimer
We are not a brokerage or investment firm. We do not offer financial advice or investment signals. This is not certified financial education. We offer access to the daily thought process of an individual and his experiences. We do not offer refunds. All sales are final.