Bulls have been having their way in recent weeks, but according to a new technical analysis from Phases & Cycles, it may be time for markets to take a little rest and relaxation before rallying any further.
Analysts David Tippin and Ron Meisels have turned cautious on North American equities in the short term, but they don't expect any serious or long-lasting pullbacks. Their "worst-case" scenario is for another minor corrective down leg and they suggest investors look for buying opportunities in strong stocks in strong sectors.
During the second half of November and early December, the Toronto market put on a two-part rally which has taken the S&P/TSX composite index to a new bull market high, the two analysts note. But the quality of the action in the past two weeks is of some concern, since internal momentum has deteriorated noticeably, as seen by the Moving Average Convergence-Divergence indicator, said the analysts. Offsetting this is the fact that upside volume has recently expanded.
"With the Toronto market moving quickly to short-term overbought status during the last week, overall this is a mixture that offers the possibility of another pullback," they wrote.
The first support level is at about 12,800, which is where the 50-day moving average currently intersects, they suggest. Below this is a major support near 12,300.
On the upside, the next target for the index is 13,500, "and higher targets remain visible," they said.
Aerospace and airline stocks, such as Bombardier Inc., should get a lift from the International Air Transportation Agency sharply increasing its profitability outlook for the airline industry, said Desjardins Securities Inc. analyst Benoit Poirier. The group now forecasts global profits of $9.1-billion (U.S.) in 2011, up from earlier predictions of $5.3-billion.
Upside: Mr. Poirier rates Bombardier with a "buy-above average risk" rating and a $7 (Canadian) target price.
Whistler Blackcomb Holdings Inc. should be able to generate substantial free cash flow and sustainable yield, but may need to break out of its historical range of 2 million to 2.2 million skier visits annually before there is significant upside to earnings and valuation, said RBC Dominion Securities Inc. analyst Irene Nattel.
Upside: Ms. Nattel initiated coverage on the stock with a "sector perform" rating and $13 price target.
Sales at European premium-brand original equipment manufacturers continued to strengthen in November, a positive signal for Magna International Inc., as its operations there are levered to such brands, said CIBC World Markets Inc. analyst Michael Willemse.
Upside: Mr. Willemse hiked his price target by $5 (U.S.) to $61 and rates the stock as a "sector outperformer."
Secure Energy Services Inc. has announced a preliminary 2011 capital program of $55-million and is evaluating opportunities that could almost double this amount, noted CIBC World Markets Inc. analyst Jeff Fetterly. If this additional capital is invested, it could add up to four additional facilities to Secure's platform, he suggested.
Upside: Mr. Fetterly hiked his price target by $1 to $6.
TriOil Resources Ltd. stock has been oversold in light of current mechanical issues at its Lochend oil operations in Alberta, said Canaccord Genuity analyst Brian Kristjansen. But these problems should not have any direct implications on the quality or ultimate deliverability of oil from the area.
Downside: Mr. Kristjansen cut his price target to $7.15 from $7.50 but reiterated his "buy" rating.