Very few TSX stocks are currently breaking out to the upside.
However, there is a growing number of stocks technically breaking down, particularly interest-sensitive real estate investment trusts and gold stocks. Food retailers have also come under pressure.
In the last issue of TSX Crosses report, I identified Loblaw Companies Ltd. (L-T), as a stock at risk for breaking down. This week, I am highlighting Metro Inc. (MRU-T), another food retailer whose stock price has broken its recent uptrend, and just days ago displayed a bearish technical signal – the "death cross."
A "death cross" is a potentially bearish signal for a stock that occurs when a shorter-term moving average, like the 50-day moving average, crosses below a longer-term moving average, the 200-day moving average in this case. When this occurs, it marks a potential negative signal confirming the downtrend in the price action may have traction.
With respect to the shares of Metro, the 50-day moving average is at $43.30, and just crossed below its 200-day moving average, which sits at $43.56.
Shares of Metro also broke below a key support level $45, ending its uptrend that had been in place. The share price is now in a downtrend with the next major support level at $40.
The relative strength index is at 43, suggesting the shares are in neutral territory, not yet oversold. Generally, a reading of 30 or below indicates an oversold condition.
From a fundamental perspective, analysts are forecasting double-digit gains for this stock. Since the beginning of the year, there have been 14 analyst reports issued, five are 'buy' recommendations, seven are 'hold' recommendations, and two are 'sell' recommendations. The average one-year target price is $46.71, implying a potential return of 11-per-cent over the next 12 months. Target prices range from a low of $39 to a high of $52.
The opposite scenario is a bullish technical signal called a "golden cross." A "golden cross" occurs when a short-term moving average, such as the 50-day moving average, crosses above a longer-term moving average, such as the 200-day moving average. When this occurs, it marks a potentially positive signal suggesting the upward price momentum may have traction.
Many traders suggest waiting until the 50-day moving average crosses above the 200-day moving average by a certain percentage, such as 3 per cent, to confirm the bullish signal.Listed below are securities with recent golden and death crosses, as well as potential future golden and death Crosses.
This report is based on technical analysis. Technical analysis does not replace fundamental analysis, but can help identify companies worth having a closer look at.