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The week's most oversold and overbought stocks on the TSX

The S&P/TSX Composite climbed 1.6 per cent for the trading week ending with Thursday's close. The domestic benchmark is now officially overbought and technically vulnerable to a temporary correction according to Relative Strength Index (RSI). The current RSI reading of 71 is above the sell signal of 70.

The market rally has left only two index constituents with RSIs below the buy signal of 30 – DHX Media Ltd., and Mullen Group Ltd.

Bank stocks have been a major driver of the index's recent return so I picked the S&P/TSX Bank Index as the focus chart this week. Almost all of the domestic banks are now overbought, trading above the RSI sell signal. The most overbought banks, in order are Royal Bank, Bank of Nova Scotia, National Bank, Laurentian Bank, CIBC and Toronto-Dominion Bank.

The bank index has left its 200-day moving average trendline in the dust, and this is important. In the past 24 months, overbought conditions have not led to significant corrections unless the index was right at the 200-day moving average. In April 2015, for instance, overbought conditions coincided with a challenge to the 200-day moving average and a painful, 14-per-cent decline in index performance followed until August 2015.

The same thing happened in October as RSI provided a sell signal just as the index poked its head above the trend line. Another sharp decline in bank stocks followed in the following three months.

The index price climbed above the 200-day moving average, and more importantly stayed there, at the end of February 2016. After that point, RSI sell signals were followed by only small, quick corrections that amounted to merely a pause in the longer term rally.

The ongoing trends suggest that holders of domestic bank stocks don't have much to worry about where technicals are concerned. There might be a fundamental reason to hold off on buying – fundamental analysis is always required before any transaction - but if things stay the same any decline in bank stocks will be minimal.

Follow Scott Barlow on Twitter @SBarlow_ROB.

OversoldRSIPrice200DMAReturn 1W %Return YTD %PE Ratio TTMPE Ratio Fwd
DHX.B-TDHX MEDIA LTD25.293625.946.95-10.40724-15.7446842.99114163#N/A N/A
MTL-TMULLEN GROUP LTD27.6469517.0316.81015-0.2927356-13.984732.4014366323.10719132
OverboughtRSIPrice200DMAReturn 1W %Return YTD %PE Ratio TTMPE Ratio Fwd
SW-TSIERRA WIRELESS INC90.792534.2621.4223540.1226962.98762151.360891531.73412376
FSV-TFIRSTSERVICE CORP87.858773.8261.023259.10433915.8142461.4508969930.54219506
IVN-TIVANHOE MINES LTD-CL A83.194094.862.084058.24054391.3385917.93613899#N/A N/A
CIGI-TCOLLIERS INTERNATIONAL GROUP82.885558.9950.733416.7425319.195824.6550148316.78909193
CTC/A-TCANADIAN TIRE CORP-CLASS A82.5862154.51138.44029.46510911.4527916.9114466115.38484517
CAE-TCAE INC82.4781920.4317.94789.7207278.7859420.1118311419.66313763
RY-TROYAL BANK OF CANADA82.1933498.6884.0382.6099649.55992714.7836579613.8888107
KXS-TKINAXIS INC81.9861374.659.625156.90742319.36142.518719465.45062129
TIH-TTOROMONT INDUSTRIES LTD80.6534347.440.14113.33551911.9244526.8436468222.31638418
BNS-TBANK OF NOVA SCOTIA80.4762681.9970.182.7057459.67094113.7058682612.84706988
IFP-TINTERFOR CORP79.6506818.1114.088959.2939120.4923620.3260708115.2312868
EFN-TELEMENT FLEET MANAGEMENT COR79.5254214.0812.021546.58591913.001613.1325642113.55149182
UNS-TUNI-SELECT INC78.2016834.2631.49975.96967616.1749718.7781220717.28095848
NG-TNOVAGOLD RESOURCES INC78.094098.047.20423.87597230.94463#N/A N/A#N/A N/A
NA-TNATIONAL BANK OF CANADA77.9030258.4648.303052.0957057.20704313.5571395611.50334514
AIF-TALTUS GROUP LTD76.3099733.4226.929854.4701427.94573477.0209310927.66556291
ABX-TBARRICK GOLD CORP76.0392626.8123.735156.47338824.755738.5996637625.70582778
LB-TLAURENTIAN BANK OF CANADA75.223561.4451.949252.9835726.42646610.7952327810.53678614
CMG-TCOMPUTER MODELLING GROUP LTD74.4965510.329.5821510.9677413.2821136.1713079333.29032258
CM-TCAN IMPERIAL BK OF COMMERCE74.15716116.5103.89481.6579426.33443111.7852260411.41485401
G-TGOLDCORP INC74.0211923.1121.272154.42838426.4223259.1469462951.48715874
TCN-TTRICON CAPITAL GROUP INC73.6871810.549.286252.72904211.4164914.5107028714.97102157
TD-TTORONTO-DOMINION BANK72.6400569.2760.35271.5838015.46009414.6372131913.4478742
MIC-TGENWORTH MI CANADA INC72.1200937.2133.13510.54870911.840278.8291764519.088910601
CFP-TCANFOR CORP72.0924517.214.69124.36893912.6391615.1587667114.04081633
IAG-TINDUSTRIAL ALLIANCE INSURANC72.0456958.4448.500952.4903519.45869911.2601153411.83475091
REF.UN-TCAN REAL ESTATE INVEST TRUST71.8730548.947.217054.7782375.9586114.54629441#N/A N/A
MBT-TMANITOBA TELECOM SVCS INC71.794839.4337.774654.4780043.87250135.5736398729.31598513
TSX-IS&P/TSX COMPOSITE INDEX71.7705915864.1714716.541.6225734.03099823.3770817917.37020875
AIM-TAIMIA INC71.285599.458.28986.1797786.418915#N/A N/A11.8125
ASR-TALACER GOLD CORP71.261973.042.90693.75426235.71428#N/A N/A10.370953
GUY-TGUYANA GOLDFIELDS INC71.103527.847.62872.48366128.1045847.6556578241.31817792
OSB-TNORBORD INC71.0734138.4231.401855.11627613.2999114.1894306210.22270965
IGM-TIGM FINANCIAL INC71.0590641.837.322754.3174439.4240813.6717425112.57142857

Source: Bloomberg/Scott Barlow

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