Monday’s TSX breakouts: 12 buys on oversold stock

Late last week, trading activity was low with the U.S. thanksgiving holiday. Consequently, there was not a lot of movement on today's price breakouts. There are 15 stocks on the positive breakouts list, while the list of negative breakouts is at 19.

Discussed today is Calgary-based, WestJet Airlines Ltd. (WJA-T). The company offers service to 100 destinations in North America, Central America, the Caribbean, and Europe. The airline will begin offering service non-stop service to London, England Gatwick airport from six Canadian cities (Vancouver, Edmonton, Calgary, Winnipeg, Toronto, and St. John's) in the spring of 2016.

On Nov. 3, the company reported third-quarter results ahead of the Street's expectations, reporting earnings per share of 82 cents, up 24 per cent year-over-year, and ahead of the consensus estimate of 75 cents. However, the positive earnings surprise was not able to lift the stock price, which fell 2 per cent. The stock price remains under pressure with concerns over higher capacity as the company is building out its fleet, and competitors are adding capacity as well. Management is guiding to system-wide capacity growth between 8 per cent and 11 per cent year-over-year in 2016. Falling demand and an oversupplied market is causing investors to shy away from airline stocks.

Analysts' recommendations

According to Bloomberg, there are twelve "buy" recommendations, five "hold" recommendations, and no "sell" recommendations with analysts' price target prices ranging from $24 to $36.50 with the average one-year price target at $29.70, implying a potential price return of 39 per cent.

The consensus earnings per share estimate is $3.04 in 2015, declining 3.6 per cent to $2.93 in 2016.

Dividend policy

The company does pay shareholders a quarterly dividend of 14 cents per share, or 56 cents per share a year, equating to an annualized yield of 2.6 per cent.

Technical analysis

Of the major Canadian airline stocks, this stock has been the worst performer year-to-date. WestJet is down 36 per cent, while shares of Air Transat are down 27 per cent, shares of Air Canada have declined 12 per cent, while shares of Chorus Aviation Inc. have increased 23 per cent year-to-date.

The relatively strength index is at 23, implying the shares are at oversold levels. Generally, a reading at or below 30 indicates an oversold condition.

In 2015, the stock price has been in a downtrend and this negative momentum appears intact. The stock is trading below its 50-day and 200-day moving averages, which are both downward sloping. The stock's 50-day moving average is at $23.79 and its 200-day moving average is at $25.87. There is downside support at $20.

As always, I strongly encourage readers to consult a financial advisor, and to do their own proper due diligence before taking any investment action.

Below is a list of stocks in the S&P/TSX composite index and the S&P/TSX Small Cap index that are technically breaking out, reaching new 55-day highs or lows.