The S&P/TSX Composite settled lower at 13,362 by Thursday's market close, after another failed assault on the psychologically-important 13,500 level. The good news is that the benchmark's 0.7 per cent decline for the week all but erased the early-month technical froth, and the current Relative Strength Index (RSI) reading of 53.7 is benign – about halfway between the buy signal of 30 and the sell signal of 70.
The most actionable ideas – which is to say, candidates for further research – from this week's post are probably stocks that aren't in the tables. I'm referring to the overbought financials from last week that experienced a correction and are now technically more attractive. These include TD Bank (which fell 1.1 per cent in the past five trading days) Sun Life Financial (down 1.93 per cent), Power Financial (0.94 per cent) and Bank of Nova Scotia (1.24 per cent).
We'll need more negative weeks to make the oversold list actionable. Reitmans (Canada) Ltd. looks like it will remain oversold forever and, as I noted last week, the gold stocks are not in charge of their own destiny – the bullion price is.
The one exception might be Loblaw Cos. Ltd. which, after falling 1.7 per cent this week, is just out of oversold range with an RSI of 30.1. Technically speaking it may be due for a bounce, but I'd be happier if it were cheaper than 17 times forward.
The overbought list is about half the size of last week with 16 companies. RSI did a good job of predicting a correction in the industrials space, as Stantec Inc. fell almost two per cent last week and Genivar Inc. eased lower, in line with the benchmark.
Alimentation Couche-Tard is currently the most overbought stock in the TSX, and our focus for the week (see above). The stock is now more extended than in April of 2012, when an RSI reading of 84 – a point below where it is now – signalled an uncomfortable 12 per cent decline in the ensuing month.
RSI is only one way to look at a stock, so the weekly caveats still apply. Technical analysis like this is a useful starting point for investors looking for entry points and the right time to take profits, but on its own, not enough reason to buy and sell stocks.
To view the tables on mobile devices, click on the following links:
Oversold stocks for the week ending November 29: http://bit.ly/18shNrf
Overbought stocks for the week ending November 29: http://bit.ly/IwAgal