The S&P/TSX Composite was largely flat for the five trading days ending with Thursday's close. In terms of technical analysis, the benchmark remains in neutral territory according to Relative Strength Index with a reading of 47 that is well inside the RSI buy signal of 30 and the RSI sell signal of 70.
Westshore Terminals Investment Corp. (WTE-T) is the most oversold stock in the benchmark. It's been mired in the oversold list for a few weeks and so far shows no inclination towards a price recovery. Westjet Airlines Ltd. (WJA-T) is the second most oversold stock by RSI, and I was tempted to use it for the focus chart this week. That is, until I remembered the wretched long term history of airline investments.
There are three real estate stocks and a utility stock among the most oversold TSX constituents this week. This highlights the new, more challenging environment for income-generating market sectors that I've been railing about elsewhere on the ROB website.
I picked the utility stock – Canadian Utilities Ltd. (CU-T) as the focus chart this week. The good news is that RSI has worked extremely well in uncovering buy and sell signals for Canadian Utilities stocks in the past three years.
An oversold signal in November 2013 was followed by a 31-per-cent rally (and that didn't include the dividend) to April 30, 2014. Another RSI buy signal in December 2013 kicked off a 16-per-cent rally in the following three and a half months. More recently, an August 2015 oversold reading was followed by a 45 per cent appreciation.
Canadian Utilities is currently re-testing its 52 week price lows near $32. It would be highly encouraging if the stock bounced off this level and jumped higher and, of course, not good at all if it dropped beneath $32 for any length of time.
The usual caveats apply. Past performance trends do not guarantee future returns or anything else for that matter. Fundamental analysis should be completed before buying or selling any investment.
Follow Scott Barlow on Twitter @SBarlow_ROB.
