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This week's most overbought stocks on the TSX

I'd love to write about technically oversold Canadian stocks today, but, according to Relative Strength Index , there aren't any.

The S&P/TSX Composite climbed 3.0 per cent for the week and is now firmly in positive territory for the year at 1.4 per cent. The strong week of performance, ending with Thursday's close, has the domestic equity benchmark bumping up against overbought territory which would make it vulnerable to a pullback. The RSI reading of 63.3 is not far away from the RSI sell signal of 70.

I picked logistics software company Kinaxis Inc. for the focus stock this week, mostly because analysts absolutely love the thing. There are seven analysts covering Kinaxis, and all of them rate the stock either "buy" or "outperform." Cormark Securities Inc. analyst Richard Tse rates the stock a "top pick." The average 12-month target price implies a 43.4-per-cent return.

The company is newly-public with a short performance history beginning in September 2014. The stock price remains below its 200 day moving average which, as we've noted previously, is cause for concern.

Kinaxis has been oversold by RSI twice in its short history. The RSI buy signal in July 2015 worked spectacularly well, marking a bottom for the stock that kicked off a 92-per-cent rally by early January 2016. The stock was also oversold, more deeply this time, in February of this year. A rally of 21 per cent followed but a sharp downdraft happened right after that. Traders on Kinaxis will need quick fingers on the sell button if this volatility continues.

As always, significant fundamental research is necessary before buying or selling any stock.

The overbought, technically vulnerable list of S&P/TSX Composite members this week is big at 23 members. Real estate investment trusts feature prominently with Boardwalk REIT the second most overbought asset in the benchmark. Dream Office REIT, Cominar REIT and Northview Apartment REIT are all among the most overbought investments in the index.

Follow Scott Barlow on Twitter @SBarlow_ROB.

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