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The S&P/ TSX Composite had a strong week, rising 1.1 per cent as of Thursday's market close. The benchmark is in technically neutral territory according to Relative Strength Index (RSI) with a reading of 52 that is about halfway between the buy signal of 30 and the RSI sell signal of 70.

There are only two index constituents trading at oversold levels implying a stock price bounce in the near term – Klondex Mines Ltd. and Element Fleet Management Corp..

I picked Canadian Imperial Bank of Commerce as the focus stock this week despite the fact that it's not quite oversold according to RSI. CIBC's RSI of 35.9 is close enough to oversold to warrant further study in light of its relevance to the market as a whole.

The chart strongly suggests that if CIBC's price falls into the official oversold zone, investors can have a lot of confidence buying the stock. Both RSI and the 200 day moving average have worked extremely well for CIBC stock in the past 24 months.

RSI buy signals in August 2015, January 2016 and November 2016 were followed by significant rallies in the stock price. In the latter case, investors buying CIBC on November 2, 2016 would have realized a 21 per cent profit by March 9 of this year, and that doesn't include dividends.

The 200-day moving average trend line has also been an important indicator for investors. CIBC stock tested the line in June and October 2016 before rallying sharply.

There are 12 S&P/TSX Composite members trading at overbought levels suggesting a temporary pullback could be in the offing. Premium Brands Holdings Corp. remains the most overbought stock in the benchmark followed by BRP Inc. (non-voting shares), Empire Company Ltd., Dollarama Inc., ATCO Ltd. Class I and Amaya Inc.. Rogers Communications Inc. B is the most widely owned overbought stock according to RSI.

Investors should always complete fundamental analysis before buying or selling any asset.

Follow Scott Barlow on Twitter @SBarlow_ROB.

RSIPrice200DMAReturn 1W %Return YTD %PE Ratio TTMPE Ratio Fwd
KDX-TKLONDEX MINES LTD22.808815.166.4808-14-17.4427.3557309623.95596602
EFN-TELEMENT FLEET MANAGEMENT COR27.7895512.1812.22966-0.6927815-1.6491948.7026630711.90615836
CVE-TCENOVUS ENERGY INC31.7693315.0518.8101-10.36332-25.63197#N/A N/A70
CM-TCAN IMPERIAL BK OF COMMERCE35.90572113.78106.2878-2.4879984.9882811.5836702610.76850274
RSIPrice200DMAReturn 1W %Return YTD %PE Ratio TTMPE Ratio Fwd
PBH-TPREMIUM BRANDS HOLDINGS CORP87.8216784.1164.840753.85103922.5851940.3761983526.44968553
DOO-TBRP INC/CA- SUB VOTING81.4849131.8525.0123510.9369612.3456811.5404782314.26332288
EMP.A-TEMPIRE CO LTD 'A'81.3879720.0118.778854.76439728.1275124.9834258226.89516129
DOL-TDOLLARAMA INC81.27622110.8898.830951212.8189429.8231261725.98546989
ACO.X-TATCO LTD -CLASS I81.099915246.330252.18117617.2421617.2642934216.22464899
AYA-TAMAYA INC78.5515922.8919.64715.00000120.4103119.013990688.393809983
DDC-TDOMINION DIAMOND CORP77.0162316.8212.37125-0.296390929.28516#N/A N/A24.42166294
NFI-TNEW FLYER INDUSTRIES INC76.3509448.8241.541056.87855120.1206117.5776701815.9296358
RCI.B-TROGERS COMMUNICATIONS INC-B72.8771958.8254.400753.64757714.5468420.919326418.33541147
FSV-TFIRSTSERVICE CORP72.2751579.6763.49581.79039325.2497765.2756547831.28996231
BAD-TBADGER DAYLIGHTING LTD71.3882935.128.55939.0087639.66147342.5613422624.375
JE-TJUST ENERGY GROUP INC70.859098.47.451552.81517216.2567910.9163632611.05263158

Source: Bloomberg/Scott Barlow

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