What are we looking for?
Constituent companies of the S&P/TSX composite index that meet any of three bullish technical-analysis indicators.
The screen
Technical analysis can be a very powerful tool when looking to capitalize on short-term market trends. Indicators can be both bullish (positive) or bearish (negative) in nature, and are often used in conjunction with charting applications to allow for a visual overlay of the trend.
A constraint many investors face when screening for technical indicators is that analysis is usually performed through charting and must be performed for each individual stock; it can be a timely process to test for these indicators on a larger investable universe.
Today's screen addresses this shortfall by using the Signal application within Thomson Reuters Eikon, which allows you to screen for technical indicators on a larger list of securities. The screen has a stock universe consisting of S&P/TSX composite constituent companies and highlights those exhibiting any of the following three bullish indicators as of Monday's close: swing three-day buy; 3-per-cent above the upper Keltner band; and a cross of the 21-day exponential moving average (EMA) over the 34-day EMA.
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Technical indicators
The first indicator, swing three-day buy, identifies situations in which price trends are reversing after a series of three-day lows. A positive swing is a bullish indicator.
The second indicator identifies companies whose stock closes 3-per-cent above the upper Keltner band. Keltner bands (channels) are similar to Bollinger bands in that they are a trend-following indicator used to identify reversals based on whether the stock price breaks through the upper or lower Keltner band. A cross above the upper Keltner band is a bullish indicator.
The 21-day to 34-day EMA cross-over identifies stocks that have seen their 21-day EMA line (indicator of average price over the past 21 days) cross from below to above their 34-day EMA, indicating positive momentum in short-term price trends. This cross from underneath to above the longer-time-frame EMA line is a bullish indicator.
What we found
Each of the aforementioned bullish indicators yielded different results, with the 3-per-cent-above-upper-Keltner-band indicator turning up five companies that have seen impressive price growth over the past five business days. First Majestic Silver Corp. has seen impressive growth year-to-date. It saw its 21-day EMA cross its 34-day EMA initially in early February and it hasn't lost momentum since.
This commentary does not provide individualized advice or recommendations for any specific subscriber or portfolio. Investors should conduct further research before investing.
Ryan Gottschalk works in the financial and risk unit of Thomson Reuters and specializes in asset management.