The good news is that the S&P/TSX Composite had a strong 1.6 per cent week Thursday to Thursday but isn't overbought according to the Relative Strength Index indicator yet. The bad news is that there are very few oversold stocks offering interesting technical entry points.
There are, however, a few very prominent names among U.S. oversold stocks that are worth a closer look.
The only two TSX stocks trading below the RSI buy signal of 30 are frequent guest Aimia Inc. and Yamana Gold Inc. I'm not interested in either at this point. Aimia has shown a remarkable tendency to disappoint even when drastically oversold, and Yamana's purchases of Osisko's assets will make that stock tough to figure out until the dust settles.
The list of oversold U.S. stocks is a lot more interesting this week even if it's not that big. Netflix Inc and Amazon.com Inc. have nosebleed price-to-earnings ratios that are too rich for most investors. But, network software provider Red Hat Inc – a stock often highlighted by Bank of America Merrill Lynch and others as a strong peripheral play on cloud computing – is there and I'll use that for focus chart of the week.
According to the chart, RSI appears effective in finding entry points for Red Hat, even though stock performance has been relatively flat. Investors who jumped in in November 2013, for instance, were rewarded with a 40 per cent price surge.
Back to Canada, the ranks of overbought stocks have swelled to 32. Energy stocks still dominate the list, with Advantage Oil and Gas Ltd. and Pacific Rubiales Energy Corp. the two most technically extended stocks in the TSX. Birchcliff Energy Ltd and Crew Energy Ltd are close behind.
Usual warnings apply; technicals are technicals and, while effective at finding buy and sell opportunities, only part of the investing story. In this weekly column, I try to only point out oversold opportunities where, if RSI doesn't work, the portfolio damage will be mitigated by other factors like dividends or stable earnings growth prospects. Still, investors should never buy any stock without fundamental research.
Follow Scott Barlow on Twitter at @SBarlow_ROB.
Name | Ticker | RSI | Return 1W % | PE Ratio TTM | PE Ratio Fwd |
---|---|---|---|---|---|
**Oversold - TSX** | |||||
Aimia Inc | AIM | 25.4 | -3.54 | N/A | 22.75 |
Yamana Gold Inc | YRI | 28.18 | -4.94 | 53.47 | 31 |
**Oversold - U.S. ** | |||||
Netflix Inc | NFLX | 26.72 | -1.16 | 148.21 | 76.29 |
Red Hat Inc | RHT | 28.66 | -1.7 | 54.77 | 33.08 |
Family Dollar Stores | FDO | 30.53 | 0.45 | 15.3 | 16.66 |
Amazon.com Inc | AMZN | 31.18 | -1.38 | 590.48 | 82.62 |
Cerner Corp | CERN | 32.99 | -1.25 | 44.01 | 33.57 |
**Overbought - TSX** | |||||
Advantage Oil & Gas Ltd | AAV | 85.8 | 5.97 | 568 | 15.15 |
Pacific Rubiales Energy Corp | PRE | 81.88 | 10.33 | 14.21 | 8.21 |
Badger Daylighting Ltd | BAD | 79.63 | 7.96 | 39.38 | 31.66 |
Altagas Ltd | ALA | 78.76 | 1.78 | 29.9 | 25.67 |
Birchcliff Energy Ltd | BIR | 78.68 | 3.02 | 25.57 | 26.16 |
Crew Energy Inc | CR | 78.37 | 7.08 | N/A | N/A |
Vermilion Energy Inc | VET | 78.13 | 0.95 | 25.37 | 20.92 |
Raging River Exploration Inc | RRX | 77.9 | 2.63 | 33.51 | 20.09 |
Nuvista Energy Ltd | NVA | 77.29 | 4.56 | N/A | 74.67 |
Encana Corp | ECA | 76.79 | 2.78 | 33.48 | 21.5 |
MEG Energy Corp | MEG | 75.94 | 1.45 | N/A | 24.21 |
Precision Drilling Corp | PD | 75.74 | 3.8 | 19.97 | 14.59 |
Canadian Natural Resources | CNQ | 74.94 | 3.47 | 20.54 | 14.25 |
Suncor Energy Inc | SU | 74.89 | 2.67 | 12.58 | 11.16 |
Linamar Corp | LNR | 74.69 | 10.3 | 16.42 | 14.38 |
Cogeco Cable Inc | CCA | 73.89 | 3.91 | 10.15 | 12.31 |
Cenovus Energy Inc | CVE | 73.79 | 0.76 | 24.81 | 18.47 |
Sherritt International Corp | S | 73.39 | 18.08 | 3.07 | N/A |
Legacy Oil + Gas Inc | LEG | 73.25 | 3.17 | N/A | 19.97 |
Paramount Resources Ltd -A | POU | 73.23 | 3.61 | N/A | N/A |
AGF Management Ltd-Class B | AGF.B | 73.22 | 3.74 | 45.9 | 19.69 |
Maple Leaf Foods Inc | MFI | 73.17 | 2.45 | 146.25 | 127.17 |
Canadian Tire Corp-Class A | CTC.A | 73.15 | 2.02 | 15.31 | 14.28 |
Enerflex Ltd | EFX | 73.1 | 1.48 | 24.37 | 14.99 |
Bellatrix Exploration Ltd | BXE | 72.8 | 3.28 | 25.4 | 12.86 |
Canadian Energy Services & T | CEU | 72.75 | 4.39 | 53.13 | 31.82 |
Superior Plus Corp | SPB | 71.73 | 9.76 | 34.32 | 16.94 |
Secure Energy Services Inc | SES | 71.52 | 3.07 | 54.06 | 39.23 |
Emera Inc | EMA | 71.21 | 1.14 | 16.39 | 18.45 |
Celestica Inc | CLS | 70.9 | 3.74 | 16.77 | 11.66 |
Canadian Oil Sands Ltd | COS | 70.78 | -0.39 | 12.39 | 12.29 |
Pembina Pipeline Corp | PPL | 70.57 | -0.19 | 40.53 | 32.87 |
Martinrea International Inc | MRE | 70.07 | 22.69 | 10.87 | 10 |