The S&P/TSX Composite rose 0.6 per cent in a volatile trading week ending with Thursday's close. According to Relative Strength index (RSI), the benchmark as a whole is in technically neutral territory with a reading of 51.6 that is roughly halfway between the buy signal of 30 and the sell signal of 70.
There are six index constituents trading at oversold, technically attractive levels by RSI. Home Capital Group Inc. is the most oversold stock in the index followed by Klondike Mines Ltd., Turquoise Hill Resources Ltd., Valeant Pharmaceuticals International Inc., Cenovus Energy Inc., and Capital Power Corp.
Capital Power is the focus chart this week. The stock is oversold after the company purchased two Ontario power plants from Veresen Inc. We'll take a close look at the technical but fundamental analysis will be required to assess whether the acquisitions have changed the profit outlook for Capital Power to the extent that the stock's technical track record is less relevant.
Capital Power stock shows a trend we've seen in the past – RSI buy signals have not been effective when the stock was trading below its 200-day moving average trend line. Buy signals in June, July, August and November of 2015 were no help at all, as the stock barely paused before continuing on its path lower.
Before now, Capital Power has not been oversold when the price was above the trend line. Investors can hold some hope that the stock will bounce because it remains above the 200-day, but there's not enough previous buy signals during the period to be really confident it. Capital Power's strong indicated dividend yield of xx per cent should help, but I don't think the stock warrants buying on technical grounds alone.
There are 28 overbought, technically vulnerable S&P/TSX Composite stocks according to RSI. This is a big list and makes me worry a bit about market froth and short term performance for the benchmark.
Canadian Tire Corporation Ltd. is the most overbought stock in the index followed by Rogers Communications Inc., Dollarama Inc., TMX Group Ltd., Veresen Inc. and Canadian Apartment REIT.
As always, fundamental analysis should be completed before any buy or sell transactions.
Follow Scott Barlow on Twitter @SBarlow_ROB.
| | RSI | Price | 200DMA | Return 1W % | Return YTD % | PE Ratio TTM | PE Ratio FWD |
HCG-T | HOME CAPITAL GROUP INC | 14.50733 | 19.68 | 28.0387 | -18.3871 | -42.94436 | 4.983467021 | 4.830633284 |
KDX-T | KLONDEX MINES LTD | 21.80332 | 4.8 | 6.5143 | -4.98008 | -23.68 | 25.06728598 | 27.1476788 |
TRQ-T | TURQUOISE HILL RESOURCES LTD | 23.66212 | 3.63 | 4.2974 | -5.699477 | -15.54524 | 26.77050241 | #N/A N/A |
VRX-T | VALEANT PHARMACEUTICALS INTE | 26.54636 | 12.06 | 24.6778 | -5.221525 | -38.46944 | #N/A N/A | 2.395527917 |
CVE-T | CENOVUS ENERGY INC | 28.60786 | 13.81 | 18.5653 | -2.875174 | -31.56164 | #N/A N/A | 63.93518519 |
CPX-T | CAPITAL POWER CORP | 29.93243 | 24.4 | 22.742 | -1.095773 | 6.473835 | 19.20393367 | 18.85625966 |
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| | RSI | Price | 200DMA | Return 1W % | Return YTD % | PE Ratio TTM | PE Ratio FWD |
CTC.A-T | CANADIAN TIRE CORP-CLASS A | 84.58778 | 166.63 | 141.9214 | 2.23981 | 20.1809 | 18.29170486 | 16.46053541 |
RCI.B-T | ROGERS COMMUNICATIONS INC-B | 83.63391 | 62.36 | 55.0505 | 3.459692 | 21.71332 | 21.24442763 | 18.54296759 |
DOL-T | DOLLARAMA INC | 83.00589 | 118.73 | 100.5498 | 1.804643 | 21.19431 | 31.93452343 | 27.68889925 |
X-T | TMX GROUP LTD | 81.29125 | 75.16 | 64.9265 | 3.164997 | 5.495302 | 18.81312224 | 15.70413707 |
VSN-T | VERESEN INC | 81.27232 | 16.03 | 12.9759 | 4.251142 | 23.78319 | 76.9899509 | 35.15350877 |
CAR.UN-T | CAN APARTMENT PROP REAL ESTA | 79.86399 | 34.6 | 31.269 | 1.468429 | 11.21131 | 21.59503593 | #N/A N/A |
AAR.UN-T | PURE INDUSTRIAL REAL ESTATE | 78.32259 | 6.58 | 5.5997 | 3.797465 | 18.91324 | 17.15306089 | #N/A N/A |
GRT.UN-T | GRANITE REAL ESTATE INVESTME | 78.0395 | 49.32 | 43.2046 | 2.244393 | 11.31914 | 19.71722639 | #N/A N/A |
ZZZ-T | SLEEP COUNTRY CANADA HOLDING | 77.79369 | 35.79 | 29.99735 | 2.57954 | 24.97898 | 27.38579376 | 22.97175866 |
BB-T | BLACKBERRY LTD | 76.8795 | 12.26 | 9.80245 | 6.423609 | 32.68399 | #N/A N/A | 605.5666808 |
AYA-T | AMAYA INC | 76.71404 | 23.68 | 19.88625 | 5.921647 | 25.14466 | 19.37799339 | 8.554188146 |
CCA-T | COGECO COMMUNICATIONS INC | 76.25131 | 76.34 | 66.62795 | 1.439048 | 17.05964 | 13.32493348 | 12.83888328 |
NVU.UN-T | NORTHVIEW APARTMENT REAL EST | 75.88884 | 22.97 | 20.9307 | 0.8830056 | 16.0342 | 14.06193331 | #N/A N/A |
IFP-T | INTERFOR CORP | 75.729 | 19.75 | 15.3827 | 1.281394 | 31.4704 | 22.16675234 | 14.89441931 |
DOO-T | BRP INC/CA- SUB VOTING | 75.32886 | 32.85 | 25.78395 | 0.7999948 | 15.55555 | 11.90281594 | 14.73755047 |
AX-U-T | ARTIS REAL ESTATE INVESTMENT | 74.57196 | 13.75 | 12.67795 | 2.233799 | 10.40338 | 10.99672737 | #N/A N/A |
PBH-T | PREMIUM BRANDS HOLDINGS CORP | 74.15303 | 86.68 | 66.9927 | 1.944839 | 26.05389 | 41.60990204 | 26.89419795 |
BCE-T | BCE INC | 73.22166 | 61.18 | 59.71765 | 0.6407087 | 6.87721 | 17.5653123 | 17.93608912 |
GIL-T | GILDAN ACTIVEWEAR INC | 73.16937 | 37.25 | 35.9302 | 3.944439 | 10.16846 | 18.28294223 | 16.5459989 |
BCB-T | COTT CORPORATION | 72.85559 | 17.25 | 17.1208 | 2.550417 | 14.30642 | 107.6741269 | 72.20688226 |
CCL.B-T | CCL INDUSTRIES INC - CL B | 72.37313 | 302.73 | 253.7921 | 2.195498 | 14.56005 | 28.95216013 | 23.51300971 |
CRR.UN-T | CROMBIE REAL ESTATE INVESTME | 72.2154 | 14.69 | 14.1868 | 0.4109553 | 9.70757 | 22.09743568 | #N/A N/A |
BEP.UN-T | BROOKFIELD RENEWABLE PARTNER | 72.14092 | 41.69 | 39.46875 | 1.19367 | 5.857106 | #N/A N/A | 461.0200918 |
CGX-T | CINEPLEX INC | 72.10587 | 52.08 | 50.99945 | 2.252697 | 2.7228 | 42.65988802 | 29.22558923 |
ECI-T | ENERCARE INC | 71.30481 | 21.21 | 18.71995 | 1.443692 | 20.07779 | 28.64083511 | 28.46979866 |
AIF-T | ALTUS GROUP LTD | 71.03928 | 31.45 | 28.5733 | 3.150643 | 2.035865 | 57.48796914 | 25.11980831 |
QSR-T | RESTAURANT BRANDS INTERN | 71.01578 | 76.6 | 64.1714 | 2.179734 | 19.8755 | 37.68738086 | 31.16603717 |
NFI-T | NEW FLYER INDUSTRIES INC | 70.87126 | 50.25 | 42.202 | 0.5629247 | 23.07318 | 17.82243465 | 16.20126039 |
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Source: Bloomberg/Scott Barlow