The S&P/TSX Composite endured a bit of a beating in the trading week ending with Thursday's close, falling 1.7 per cent. In terms of Relative Strength Index (RSI), the benchmark's reading of 37 is much closer to the oversold buy signal of 30 than the overbought RSI sell signal of 70.
There are 23 index members trading at oversold levels by RSI led by Aimia Inc., Badger Daylighting Ltd., Uni-Select Inc., Westshore Terminals , Enercare Inc. and Stantec Inc. Large cap, widely held names on the oversold this include Power Corp., Inter Pipeline Ltd., Power Financial Corp., Sun Life Financial, Industrial Alliance Insurance and Hydro One Ltd.
I picked Sun Life as the focus chart because of its prominence in the Canadian insurance industry.
RSI Buy signals have effectively forecasted stock price rallies for Sun Life over most of the past 24 months, but they've been less effective recently. An August 24, 2015 buy signal was followed by a 16 per cent price appreciation to October 23. 2015. Another buy signal on June 28, 2016 predicted a 31 per cent rally to November 25.
More recently however, RSI buy signal in late February 2017 and mid-April have been followed by small price surges before the stock headed downwards.
Sun Life's stock price has knifed through the 200-day moving average trend line in recent days and, in light of RSI's lack of recent success finding temporary market bottoms, I don't think the current buy signal is trustworthy enough to act on. I'd prefer to see the stock regain the 200-day moving average first.
As always, there may be a strong fundamental reason for a rally that is not picked up by technical analysis. Fundamental research should always accompany technical studies.
There are only five S&P/TSX Composite constituents trading at overbought, technically vulnerable RSI levels. These are, in order, Blackberry Ltd., Brookfield Renewable Partners, Centerra Gold Inc., Martinrea International Inc. and New Flyer Industries Inc.
Follow Scott Barlow on Twitter @SBarlow_ROB.
| Name | RSI | Price | 200DMA | Return 1W % | Return YTD % | PE Ratio TTM | PE Ratio FWD |
AIM-T | AIMIA INC | 11.38895 | 2.38 | 8.3502 | -20.42042 | -69.45877 | #N/A N/A | #N/A N/A |
BAD-T | BADGER DAYLIGHTING LTD | 13.81077 | 21.79 | 30.4147 | -28.04319 | -31.22973 | 27.91692941 | 13.70440252 |
UNS-T | UNI-SELECT INC | 16.24005 | 29.53 | 31.7188 | -6.87898 | -0.6069459 | 15.72548307 | 15.13697354 |
WTE-T | WESTSHORE TERMINALS INVESTME | 16.54013 | 19.24 | 25.0149 | -9.952833 | -25.81051 | 13.89963493 | 12.07784055 |
ECI-T | ENERCARE INC | 17.60399 | 18.37 | 19.05025 | -14.31936 | 4.00596 | 30.58032844 | #N/A N/A |
STN-T | STANTEC INC | 20.88523 | 31.11 | 33.215 | -4.422833 | -9.849801 | 69.1476252 | 15.45454545 |
JE-T | JUST ENERGY GROUP INC | 21.60101 | 7.35 | 7.5037 | -15.96737 | -0.21292 | 30.61109706 | 12.2296173 |
SPB-T | SUPERIOR PLUS CORP | 22.46842 | 12.02 | 12.297 | -2.84553 | -4.510915 | 54.90791029 | 16.83473389 |
CUF.UN-T | COMINAR REAL ESTATE INV-TR U | 23.84328 | 13.17 | 14.8852 | -4.561914 | -7.401697 | 8.247595752 | #N/A N/A |
SNC-T | SNC-LAVALIN GROUP INC | 24.21265 | 50.79 | 55.07975 | -4.745951 | -11.58103 | 20.4197244 | 23.2661475 |
POW-T | POWER CORP OF CANADA | 24.45879 | 29.04 | 29.80725 | -3.314365 | -2.873043 | 10.55467694 | 9.827411168 |
SLF-T | SUN LIFE FINANCIAL INC | 25.23421 | 44.92 | 47.49405 | -4.275894 | -12.83312 | 10.84843565 | 10.99902057 |
CHE.UN-T | CHEMTRADE LOGISTICS INCOM FD | 25.63795 | 17.85 | 18.2059 | -2.369144 | -4.400385 | 58.19924808 | #N/A N/A |
HR.UN-T | H&R REAL ESTATE INV-REIT UTS | 26.50758 | 21.87 | 22.6451 | -3.200693 | 0.3684983 | 18.93450828 | #N/A N/A |
SCL-T | SHAWCOR LTD | 26.54873 | 31.34 | 34.32665 | -4.088738 | -12.5201 | #N/A N/A | 15.7884131 |
MDA-T | MACDONALD DETTWILER & ASSOC | 27.11635 | 62.92 | 73.25345 | -4.664941 | -5.688317 | 18.84441621 | 11.09700176 |
ARE-T | AECON GROUP INC | 27.69048 | 15.26 | 16.57475 | -3.293221 | 0.874846 | 19.22677161 | 16.5689468 |
IPL-T | INTER PIPELINE LTD | 27.91483 | 26.65 | 28.09345 | -2.950882 | -8.965145 | 18.76965417 | 18.71488764 |
PWF-T | POWER FINANCIAL CORP | 28.31411 | 32.32 | 33.03955 | -2.602908 | -2.955499 | 10.83620489 | 10.0092908 |
IAG-T | INDUSTRIAL ALLIANCE INSURANC | 28.48516 | 50.44 | 53.2285 | -7.835548 | -5.788521 | 9.589353351 | 10.19401778 |
OTEX-T | OPEN TEXT CORP | 28.64598 | 43.27 | 42.9778 | -3.482141 | 4.654436 | 34.39760568 | 13.9803287 |
GWO-T | GREAT-WEST LIFECO INC | 28.77043 | 33.63 | 34.7439 | -2.357394 | -3.645713 | 12.41725562 | 11.76285414 |
H-T | HYDRO ONE LTD | 29.42185 | 23.005 | 24.2405 | -0.7798957 | -2.000925 | 20.35840634 | 18.56739306 |
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| | RSI | Price | 200DMA | Return 1W % | Return YTD % | PE Ratio TTM | PE Ratio FWD |
BB-T | BLACKBERRY LTD | 79.5152 | 13.76 | 10.19025 | 7.16511 | 48.91776 | #N/A N/A | 724.9812873 |
BEP.UN-T | BROOKFIELD RENEWABLE PARTNER | 78.78613 | 43.66 | 39.7181 | 0.6028247 | 10.57149 | #N/A N/A | 96.13362593 |
CG-T | CENTERRA GOLD INC | 71.63477 | 8.16 | 6.97615 | 4.076435 | 29.88871 | 8.3166338 | 8.525539218 |
MRE-T | MARTINREA INTERNATIONAL INC | 70.94688 | 11.71 | 8.76365 | 1.391304 | 36.15056 | 7.450365385 | 6.265382558 |
NFI-T | NEW FLYER INDUSTRIES INC | 70.8839 | 55.96 | 43.4282 | -0.3068619 | 35.89228 | 18.25605812 | 17.11341969 |
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Source: Bloomberg/Scott Barlow