The S&P had a bad week leading to Thursday's market close, shedding 2.4 per cent.
The loss removed much of the technical froth from the benchmark, as the current Relative Strength index reading of 43.9 means it has fallen from almost-overbought levels to neutral territory between the RSI sell signal of 70 and the oversold buy signal of 30.
There are four stocks trading at technically attractive RSIs below the oversold target of 30: Extendicare Inc., Canadian Pacific Railways Ltd., ATS Automation Tooling Systems Inc. and IGM Financial Inc.
I picked IGM for the focus chart this week because it is trading closest to its 200-day moving average.
As we've seen, RSI buy signals do not work as well when the stock price is below the 200-day. None of this week's oversolds are trading above the longer-term trend line, but IGM is less than one dollar away from pushing above it. Importantly, IGM's indicated dividend yield is 6.2 per cent and historically, higher yields have protected downside investment risk.
From a technical perspective, the chart makes clear that it's very, very important for IGM stock to regain the 200-day moving average. The price has been below the trend line for the vast majority of the past 24 months, and RSI buy signals have worked either temporarily, with only small rallies, or not at all. This means this week's chart is less actionable for investors than I would have hoped, but it does underscore why the 200-day moving average should be considered before buying any asset. Investors, no matter how hungry for dividend income, should wait until the stock regains the 200 day before considering buying it for their portfolio in my opinion.
Every week I remind readers that this weekly report considers technical analysis only and fundamental research must be completed before buying or selling any investment asset.
This week's list of overbought, technically vulnerable TSX stocks by RSI has been cut to three members; Penn West Petroleum Ltd., Pretium Resources Inc., and Turquoise Hill Resources Ltd.
Follow Scott Barlow on Twitter @SBarlow_ROB.
