Skip to main content

Overbought, technically extended stocks outnumber oversold domestic equities 32 to one this week and, with the S&P/TSX composite only a fraction below the Relative Strength Index "sell" signal, investors should hold off on adding more stocks until the market cools off.

The domestic benchmark added 0.9 per cent in the past five sessions and now has an RSI of 69.1, less than a full point below the 70 mark that predicts a pullback.

A geopolitically-inspired surge in oil prices sees energy stocks dominate the overbought list. Suncor Energy Inc., Lightstream Resources Ltd., Birchcliff Energy Ltd., Paramount Resources Ltd. and Bonterra Energy Corp. are all among top 10 stocks most vulnerable to a pullback according to RSI.

Risk-averse investors should avoid these stocks for now but on the other hand, stock prices are likely to continue higher as long as Iraq's political implosion continues.

Investors in domestic gold stocks had a great week but they must have strong stomachs to deal with the crazy volatility in the sector. In the past five trading days, Semafo Inc. jumped 22 per cent, Argonaut Gold leaped 27.5 per cent and Detour Gold Corp rose 17.3 per cent.

The benchmark, approaching overbought territory, is the focus chart for the week. The S&P/TSX composite has been extremely strong since mid-2013 and overbought readings have predicted a period of flat performance rather than a sell-off.

Bloomberg

Still, seasonally low trading volumes and overall technical froth can make for a dangerous combination. Risk-averse investors should just head to the cottage and wait this one out. There will likely be better buying opportunities later in the summer.

The usual warnings apply. Technically analysis is only a part of the investment picture and should be used in combination with fundamental analysis.

OversoldRSI1 W Return %PE Ratio TTMPE Ratio Fwd
Artis Real Estate Investment27.94-2.4214.9010.62
Granite Real Estate Investme30.55-2.1615.37N/A
OverboughtRSI1 W Return %PE Ratio TTMPE Ratio Fwd
Canadian Pacific Railway Ltd82.901.8029.6021.68
Torex Gold Resources Inc80.3117.83N/AN/A
Suncor Energy Inc79.697.1214.4411.84
Lightstream Resources Ltd79.619.92N/A15.00
Freehold Royalties Ltd79.542.9128.75N/A
Birchcliff Energy Ltd76.050.0021.8020.86
Detour Gold Corp75.9717.27N/A59.79
Paramount Resources Ltd -A75.943.32N/A85.81
Bonterra Energy Corp75.431.8025.7119.79
Iamgold Corp75.3312.8214.7327.01
Whitecap Resources Inc75.024.1258.5721.27
New Gold Inc74.6610.1576.1936.07
Oceanagold Corp74.5122.567.1617.35
Baytex Energy Corp74.124.4290.9115.89
Semafo Inc73.7822.16N/A20.30
Bank Of Nova Scotia73.680.3113.2712.36
Canadian Natl Railway Co73.071.4821.6718.72
Pengrowth Energy Corp73.014.62N/A60.32
Canadian Natural Resources72.963.9818.6713.49
Pacific Rubiales Energy Corp72.645.1715.918.51
Novagold Resources Inc72.3314.06N/AN/A
Surge Energy Inc72.276.0129.0820.97
Veresen Inc72.15-0.3447.6575.99
Industrial Alliance Insuranc72.039.1312.4112.33
Enerflex Ltd71.451.9733.0514.79
Penn West Petroleum Ltd71.403.24N/A32.23
Osisko Mining Corp71.285.01N/A28.63
Argonaut Gold Inc70.8527.4836.0325.74
China Gold International Res70.8112.5428.3015.65
Laurentian Bank Of Canada70.521.6310.268.63
Saputo Inc70.124.9221.5518.86
Advantage Oil & Gas Ltd70.08-1.21N/A12.55
Crescent Point Energy Corp69.922.3860.6728.80