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Investors in Search of Yield Found International Paper on Friday

Investors in Search of Yield Found International Paper on Friday

As the stock market wavers and Treasury yields fall, it makes dividend paying stocks more attractive. High yielding stocks like International Paper Co (NYSE: IP) found buyers on Friday as the price finished 2.5% higher on the session. Friday’s move represents a bounce off prior support and an indication that the price of the stock is looking to head higher.

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  • The Materials sector was the only positive sector last week, with Industrials and Utilities taking the next two positions. IP is not a utilities company but one thing it has in common is yield. Last week reflected a desire for yield and it’s a desire that has been building. The current yield for the company is 0.71% higher than the S&P 500 average, which is near its all-time low. That low was established in 2000.

    IP achieved its high price following the sell-off with much of the rest of the market on June 8. The high near $40 was fleeting as the share price quickly tumbled to near $33. The price took a bullish step higher after basing near $33 for about a month. Its next step was in the $35 to $37.50 range that it broke out of on September 2. The price has been forming a pennant formation since that breakout.

    A pennant is made up of a flagpole and a consolidation phase where the price forms a small triangle. The flagpole is the move on September 1 and September 2. The pennant is the price pattern since the September 2 high until the breakout last Friday.

    The $3.50 flagpole is added to the breakout level near $38.50 to arrive at a target or $42. The bigger move on a close above $40 is the December 10, 2019 high near $47.50.

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  • Option traders may want to buy an 18 DEC 20 $37.50 call for around $3.60. Consider rolling to a higher strike if the option gains 30% or more.