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The S&P/TSX composite index rose a scant 0.4 per cent for the trading week ending with Thursday's close and stands 0.8 per cent higher for the year. According to Relative Strength Index (RSI) , the benchmark is at the low end of neutral in technical terms with a reading of 42, closer to the oversold, buy signal of 30 than the sell signal of 70.

There are 15 index members trading at oversold RSI levels indicating a higher probability of a short term rally. MEG Energy Corp. is the most oversold company in the S&P/TSX composite this week followed by Cenovus Energy Inc., Ritchie Brothers Auctioneers, Suncor Energy Inc. and Inter Pipeline Ltd. The REIT sector is represented on the oversold list by Canadian REIT and RioCan REIT.

I picked BCE Inc. for the focus chart this week because it's widely held and domestic telecom service companies are rarely oversold.

The good news is that RSI buy signals for BCE have effectively signalled rallies in the past two years. A buy signal in December, 2015, was followed eventually by a hefty 18-per-cent price rally (not including significant dividend payments) to July, 2016. A June, 2016, buy signal was followed by a 7.8-per-cent surge. A November, 2016, RSI buy signal was less effective. BCE stock did stop falling at that stage, but no major price increase followed.

The one note of concern is that BCE recently fell below its 200-day moving average trend line. On the whole, however, investors can feel reasonably confident in a bounceback for BCE, assisted by a 4.8 per cent indicated dividend yield. This is dependent, of course, on the outcome of fundamental research which should always accompany technical analysis.

Home Capital Group is the most overbought stock in the index this week in a dramatic turnaround. Dream Global REIT, Genworth MI Canada, Fortis Inc. and Hudson's Bay Co. join Home Capital as stocks more likely to see a short-term price correction according to RSI.

This week's most overbought and oversold stocks on the TSX

TickerCompanyRSIPrice200DMAReturn 1W %Return YTD %PE Ratio TTMPE Ratio Fwd
MEG-TMEG ENERGY CORP20.273.796.46-8.17-58.61N/AN/A
CVE-TCENOVUS ENERGY INC22.119.0017.13-14.04-55.33N/A17.79
RBA-TRITCHIE BROS AUCTIONEERS22.8737.0044.63-9.14-18.3325.6024.05
SU-TSUNCOR ENERGY INC24.5138.2740.83-2.68-11.8656.5021.32
IPL-TINTER PIPELINE LTD24.8724.6027.89-2.75-14.3917.3316.70
REF.UN-TCAN REAL ESTATE INVEST TRUST25.8746.8047.50-1.762.7013.31N/A
REI.UN-TRIOCAN REIT26.6224.4826.19-1.53-5.8520.01N/A
ECA-TENCANA CORP27.1710.9714.92-6.51-30.5795.1918.47
FFH-TFAIRFAX FINANCIAL HLDGS LTD27.20559.36640.30-0.70-12.05N/A16.47
BTE-TBAYTEX ENERGY CORP27.632.905.07-8.49-55.64N/AN/A
CEU-TCES ENERGY SOLUTIONS CORP27.835.416.68-6.03-28.73N/A40.98
CPG-TCRESCENT POINT ENERGY CORP28.0310.0615.35-8.29-44.23N/A36.85
SCL-TSHAWCOR LTD28.5927.5634.10-0.83-22.57N/A13.84
GTE-TGRAN TIERRA ENERGY INC28.712.773.61-6.25-33.50N/A8.69
BCE-TBCE INC29.4759.0459.40-0.714.0216.8417.44
RSIPrice200DMAReturn 1W %Return YTD %PE Ratio TTMPE Ratio Fwd
HCG-THOME CAPITAL GROUP INC78.7019.9023.8238.99-38.794.9725.45
DRG.UN-TDREAM GLOBAL REIT78.0710.869.591.5918.6317.27N/A
MIC-TGENWORTH MI CANADA INC75.2136.9833.7114.2212.988.438.62
DOO-TBRP INC71.9239.5128.522.0238.7725.4817.30
FTS-TFORTIS INC71.8246.2042.621.7113.8720.55N/A
HBC-THUDSON'S BAY CO71.1112.0612.7941.02-9.11N/AN/A
WPK-TWINPAK LTD70.3360.7749.964.9733.5627.8925.74
VRX-TVALEANT PHARMACEUTICALS 70.3020.5020.9327.475.34N/A4.23

Source: Scott Barlow, Bloomberg