The S&P/TSX Composite eased higher by 0.12 per cent for the trading week ending with Thursday's close. The benchmark's current Relative Strength Index (RSI) reading of 43.3 puts the market in the lower end of the technically neutral territory bordered by the oversold, RSI buy signal of 30 and the overbought, sell signal of 70.
Jean Coutu Group PJC Inc. is the most oversold index constituent this week followed by Canadian Real Estate Investment Trust, real estate consulting firm Altus Group Ltd., MEG Energy Corp., Loblaws Companies Ltd. and Open Text Corp.
I picked RioCan Real Estate Investment Trust for the focus stock this week. The trust's price was hit by rising bond yields (which make all income-generating equity investments less attractive) and the ongoing stream of bad news from the department stores that make up the anchor tenants for RIOCAN's shopping mall holdings.
RioCan has traded in a tight range between $22 and $30 in the past two years and the price has recently fallen below its 200-day moving average trend line. RSI buy signals have a mixed record in uncovering profitable entry points for the trust. A buy signal in September 2015 worked reasonably well although the subsequent rally was followed quickly by a sharp decline. A January 2016 buy signal kicked off a big rally to July of that year when an RSI sell signal provided warning that the good times were over for a while.
Recent RSI buy signals haven't worked well at all. Brief, tiny rallies have been quickly followed by further declines. From November 2016, the unit price has made numerous attempts to regain the 200 day moving average trend line but failed.
RioCan maintains an extremely attractive 5.9-per-cent indicated yield, but at this point the RSI buy signal does not appear trustworthy given recent history.
There are only six S&P/TSX Composite members trading in overbought territory and vulnerable to a correction according to RSI. TransAlta Corp. is the most overbought company in the benchmark followed by SNC-Lavalin Group Inc., Alaris Royalty Corp., Intact Financial Corp., Valeant Pharmaceuticals International Inc. and Industrial Alliance Insurance and Financial Services Inc..