The list of oversold, technically attractive TSX stocks is shockingly small for a week when the benchmark fell 1.2 per cent.
The S&P/TSX Composite carries a Relative Strength Index (RSI, my favoured short-term technical indicator) reading of 42 as of Thursday's close – in neutral territory between the buy signal of 30 and the sell signal of 70.
There are only nine stocks trading below the RSI buy signal of 30, suggesting they are due for a bounce in price. Not one of them is an energy or metals company which is even more surprising given the volatility of recent weeks.
Great Canadian Gaming Corp is the most oversold TSX constituent, followed by Dream Unlimited, Avigilon Corp, Stantec Inc. and Hudson's Bay Co. Forestry stocks are represented by Canfor Corp and Interfor Corp., a bit surprising given recent strength in U.S. housing data – I suspect slower lumber demand from China is the cause of the weakness.
Industrial company Stantec Inc. is the focus chart this week.
RSI has successfully identified both profitable buy signals and money-saving sell warnings for Stantec in the past two years (although past success does not guarantee future returns, as always). A buy signal on the last day of 2013 was followed by a ten-month, 19-per-cent rally. Stantec stock "double bottomed" in December 2014 and early January 2015, hitting oversold levels both times, (usually a good sign) and then climbed almost 30 per cent by July 17.
RSI sell signals would have protected Stantec investors in December 2013, September 2014 and more recently in July.
In terms of technicals, Stantec looks promising, but, given the amount of domestic economic uncertainty lately, investors must accomplish considerable fundamental analysis before considering adding the stock to their portfolio. Analysts remain positive on the company with a 12-month average price target of 36.92 which implies a 25-per-cent potential return.
Follow Scott Barlow on Twitter @SBarlow_ROB.
