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The S&P/TSX composite eased lower by 0.14 per cent for the trading week ending with Thursday’s close and the benchmark stands 3.7 per cent higher for 2018 so far. In terms of technical analysis, the TSX’s Relative Strength Index level of 60.2 puts it in the neutral range although closer to the overbought sell signal of 70 than the RSI oversold buy signal of 30.

There are five oversold, technically attractive index constituents according to RSI this week. Mag Silver Corp. is the most oversold stock in the benchmark, followed by Corus Entertainment Inc. (B), Centerra Gold Inc., First Capital Realty Inc. and Aurora Cannabis Inc.

I picked Fairfax Financial for the focus chart this week even though it’s lurking just outside officially oversold territory with an RSI of 33.

An actual buy signal for Fairfax, if it comes, would be very interesting for potential buyers of the stock based on recent history. Over the past 24 months, RSI buy signals have provided lucrative entry points for Fairfax when they’ve come in pairs.

The stock price provided two RSI buy signals in November of 2016 and a 13-per-cent rally followed to Dec. 21 of the same year (although a prolonged slide followed shortly thereafter). In June of 2017, a series of buy signals predicted a 28-per-cent rally to the end of November.

June, 2018, produced an “almost buy signal” – and RSI of 31 – and was followed by an official buy signal in early February. The stock priced jumped 25 per cent to mid-June.

The most interesting thing that could happen here is for Fairfax to generate an RSI buy signal, rally a bit, and then produce another buy signal. This pattern has been promising in the past.

As always, investors should verify any technical conclusions with fundamental research.

There are 12 overbought, technically vulnerable index stocks according to RSI this week. Rogers Communications Inc (B) is the most extended stock in the benchmark, followed by Colliers International Group, Altagas Ltd., Genworth MI Canada Inc., CGI Group Inc. (A), and Descartes Systems Group.

Open this photo in gallery:


Ticker Company RSI Price 200DMA Return 1W % Return YTD % PE Ratio TTM PE Ratio Fwd
MAG-T MAG SILVER CORP 20.84524 12.39 14.11942 -5.564024 -20.16753 #N/A N/A #N/A N/A
CJR.B-T CORUS ENTERTAINMENT INC-B SH 22.66668 4.28 8.538 -8.033867 -59.56914 3.672555807 #N/A N/A
CG-T CENTERRA GOLD INC 26.16724 5.94 7.2245 -5.564388 -7.763975 5.726127406 6.885306546
FCR-T FIRST CAPITAL REALTY INC 29.05028 20.01 20.51065 -0.6454816 -1.384677 24.19188143 #N/A N/A
ACB-T AURORA CANNABIS INC 29.41119 7.68 8.4252 -13.99776 -20 #N/A N/A #N/A N/A
Overbought stocks
RSI Price 200DMA Return 1W % Return YTD % PE Ratio TTM PE Ratio Fwd
RCI.B-T ROGERS COMMUNICATIONS INC-B 80.01872 67.06 62.2723 2.319194 6.38182 17.75285242 15.342027
CIGI-T COLLIERS INTERNATIONAL GROUP 77.57335 109.12 84.008 1.905118 43.92045 40.36531188 22.18394549
ALA-T ALTAGAS LTD 74.29507 28.26 26.9517 0.6768792 2.99128 44.0900464 19.5300622
MIC-T GENWORTH MI CANADA INC 73.99829 45.06 41.4322 4.064665 5.985042 8.926912515 9.11223458
GIB.A-T CGI GROUP INC - CLASS A 73.89046 86.65 73.3281 -0.253252 26.86676 21.58586516 19.81930467
DSG-T DESCARTES SYSTEMS GRP/THE 73.12236 45.6 37.4695 0.9966778 27.58814 89.45895115 30.65046997
GOOS-T CANADA GOOSE HOLDINGS INC 72.0639 85.46 45.4129 7.781561 115.2103 99.46797446 76.99099099
OTEX-T OPEN TEXT CORP 70.86708 50 44.29025 0.6036217 12.73991 37.32209597 14.05604712
GUD-T KNIGHT THERAPEUTICS INC 70.79587 8.68 8.0196 1.283547 4.452467 72.32429534 133.5384615
TRI-T THOMSON REUTERS CORP 70.78516 55.8 53.545 0.3958258 3.636093 28.90869659 57.50319368
QSR-T RESTAURANT BRANDS INTERN 70.55334 84.97 77.20155 0.7469765 11.68687 30.80165264 24.86912649
KXS-T KINAXIS INC 70.0533 93.32 80.1125 4.818601 21.52624 86.66885818 71.78632829

Source: Scott Barlow, Bloomberg



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