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The S&P/TSX Composite rose another 0.86 per cent for the trading week ending with Thursday's close and now stands 3.6 per cent higher for 2017. In technical terms, the benchmark is still in the neutral zone, according to Relative Strength Index (RSI) , but with a reading of 58 its closer to the overbought, RSI sell signal of 70 than the oversold buy signal of 30.

Recent market strength has left only three technically attractive oversold stocks in the index, led by Klondex Mines Ltd., Magna International Inc. and Valeant Pharmaceuticals International Inc. are the other two companies on the list.

I picked Magna as the focus chart this week. RSI buys signals have worked reasonably well in finding profitable entry points for the stock, but, importantly, buy signals have been far less reliable when the price was below the 200-day moving average trend line.

An RSI buy signal on April 30, 2015 coincided with a test of the 200-day moving average. The stock proceeded to rally 20 per cent to June 1. Another buy signal in late August 2015, when the price was below the trend line, was not as successful – a small rally was followed by another decline. Buy signals were also ineffective in November 2015 and January 2016.

The late June 2016 buy signal ended up very profitable as the stock climbed 41 per cent in the next six months.

Stated bluntly, I don't trust the current buy signal. Magna's stock price only recently fell below the 200-day moving average and if it fails to regain the trend line, a sustained downtrend is possible. It's not far from the trend line, however, and could easily move above it. In this case, the stock would look more attractive from a technical perspective. As always, fundamental research should always be completed before any market transaction.

There are 17 overbought, technically vulnerable stocks according to RSI. Canadian Tire Corporation Ltd. is the most overbought company in the S&P/TSX Composite, followed by Dollarama Inc., New Flyer Industries Inc., and Veresen Inc.. Blackberry Ltd., Rogers Communications Inc., and Telus Corp. are among the most widely-held overbought stocks this week.

Follow Scott Barlow on Twitter @SBarlow_ROB.

RSIPrice200DMAReturn 1W %Return YTD %PE Ratio TTMPE Ratio Fwd
KDX-TKLONDEX MINES LTD26.594345.316.49470.5813994-16.9627.9899071229.63420903
MG-TMAGNA INTERNATIONAL INC28.4575153.3254.75065-8.211645-7.7631197.6277608857.122965878
VRX-TVALEANT PHARMACEUTICALS INTE28.6139712.7425.312-12.61017-33.79558#N/A N/A2.449825225
RSIPrice200DMAReturn 1W %Return YTD %PE Ratio TTMPE Ratio Fwd
CTC.A-TCANADIAN TIRE CORP-CLASS A81.13218162.19140.82473.96829917.3604917.8043063716.02193026
DOL-TDOLLARAMA INC79.53104114.3199.342852.80483515.9833230.745685126.78931333
NFI-TNEW FLYER INDUSTRIES INC77.9020449.6441.75081.59770322.0397817.7699978116.10513837
VSN-TVERESEN INC77.8855715.1912.76823.97532517.803772.9555378534.21171171
DDC-TDOMINION DIAMOND CORP76.5819317.1112.483152.14031332.05227#N/A N/A21.6138394
EMP.A-TEMPIRE CO LTD 'A'75.4057620.0418.75210.449775928.703825.0208830928.6695279
FSV-TFIRSTSERVICE CORP75.0895681.3164.061051.4811127.1048666.2382246331.752564
KEL-TKELT EXPLORATION LTD73.839947.135.866956.7669144.874445#N/A N/A#N/A N/A
ZZZ-TSLEEP COUNTRY CANADA HOLDING73.0074233.5829.46135.9372219.0076525.694746621.55327343
AAV-TADVANTAGE OIL & GAS LTD72.7489.178.715555.0400980.548247752.8390171823.45268542
NVU.UN-TNORTHVIEW APARTMENT REAL EST72.0542122.3820.91162.84013214.0029713.70074293#N/A N/A
BB-TBLACKBERRY LTD71.800210.579.6825514.7788515.15152#N/A N/A416.0303399
LUC-TLUCARA DIAMOND CORP71.683913.143.3713264.9668915.23123112.581792859.392760673
RCI.B-TROGERS COMMUNICATIONS INC-B70.6002759.4454.631350.986062315.6763521.1398289618.50560399
T-TTELUS CORP70.4265144.1942.96622.4797214.6123716.9289648616.16313094
BAD-TBADGER DAYLIGHTING LTD70.3966135.1528.8910.427354810.1301242.6219746624.40972222
ECN-TECN CAPITAL CORP70.218643.8#N/A N/A6.76056415.17756#N/A N/A14.23220974

Source: Bloomberg/Scott Barlow