What are we looking at?
Upwardly trending Canadian and U.S. stocks.
The screen
We limited our pool to the S&P/TSX 60 index and the S&P 100 index.
To find the most positive, we looked at each stock's 40-week moving average (40wMA). This is the average closing price for the stock over a period of 40 weeks. Charting the moving average week by week gives us a sense of investor's behaviour: Are they growing more (or less) enthusiastic about the company's outlook and are they more (or less) likely to purchase the stock?
Generally speaking, stocks that trade above their rising 40wMAs are the best candidates for investments; they are the ones that show a bullish pattern. We listed only the stocks that are currently trading near or above their rising 40wMA at this time in the adjoining table.
We chose this indicator because stocks tend to stay relatively close to their 40wMAs. When stocks rise far above this average, investors often use this as an opportunity for profit taking, since this usually leads to a price correction toward the 40wMA. Similarly, when stocks decline far below this average investors can usually expect a recovery rally to follow toward the average, providing a selling opportunity.
Given the recent negative market action, we wanted to highlight the numerous stocks that are still trending upward at this time.
More about Phases & Cycles
Phases & Cycles Inc. has been providing independent research for more than 25 years, using Behaviour Analysis. It publishes investment ideas for both the Canadian and U.S. equity markets. Its research reaches more than 1,000 users across North America and Europe.
What did we find?
There are a total of 19 stocks in the S&P/TSX 60 and S&P 100 indexes that meet our criteria. A large majority of these fall within the consumer discretionary/staple sectors, indicating that these sectors are the most attractive at this time.
Although these 19 stocks are positive, some are currently overbought and could have a minor pullback toward their 40wMAs; they include:
Loblaw Cos. Ltd., Valeant Pharmaceuticals International Inc.and Amazon.com Inc. Stocks that are currently better suited for investment include: Thomson Reuters Corp., Agrium Inc., Rogers Communications Inc., Facebook Inc. and Home Depot Inc. These are currently trading near or above their rising 40wMAs and are most likely to start a new up-leg.
Readers should consult a professional before making investment decisions.
A more detailed list, covering a larger pool of positive stocks, is available here.
Ron Meisels is the director of research and Monica Rizk is the senior technical analyst for Phases & Cycles Inc. They may hold shares in companies profiled.