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What are we looking for?

Canadian stocks showing strength in a rebounding equity market.

The S&P/TSX Composite Index continues to rebound after declining 37 per cent to March lows from its late February high. It seems hard to believe the S&P/TSX is only down about 8 per cent year to date amid a global pandemic. The Nasdaq-100 Index, meanwhile, posted a record intraday high on Thursday. It seems the market is disregarding the loss of jobs worldwide, as well as social and economic unrest. Global equity markets have been able to look beyond anything short term, which is quite unprecedented. Those waiting for a retest of March lows amid all the negative economic headlines have missed a market rebound of almost 40 per cent in North American equity markets.

The screen

We will be using Trading Central Strategy Builder to search for Canadian stocks that have demonstrated bullish price momentum in the face of the recent market turbulence.

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We begin by setting a minimum market capitalization threshold of $5-billion. This will focus our search on mid- to large-cap Canadian stocks and avoid smaller companies with less stable streams of revenue. We will also limit our search to stocks currently trading within 10 per cent of their 52-week highs and with stock prices that have not declined in the past month.

We have also included the price-to-earnings ratio year to date and one-year price performance for your reference.

More about Trading Central

Trading Central is a global leader in financial market research and investment analytics for online retail brokers and institutions. Its product suite provides actionable trading ideas based on technical and fundamental research covering stocks, exchange-traded funds, indexes, forex, options and commodities. Strategy Builder, our stock screener, is available through leading retail brokers in Canada and worldwide.

What we found

Topping our list is TMX Group Ltd., which operates the Toronto Stock Exchange, TSX Venture Exchange and Montreal Exchange, a bourse for derivatives. It has the best one-year performance on our list, having gained 43.5 per cent. TMX is also the top performer over the past four weeks with a return of 15.1, indicating good upside momentum. For all its exchanges, TMX recently reported average daily trading volume for May of 800 million shares, which was up 58 per cent year over year. The company is clearly benefiting from increased trading amid higher than usual market volatility.

Canadian National Railway Co. has the largest market cap on our list at $86.1-billion. Its railway spans Canada from coast to coast and extends through Chicago to the Gulf of Mexico. Bank of Montreal just raised its price target on the company to $128 from $124. The stock is within 5.5 per cent of its all time high.

Trading Central Strategy Builder provides a backtesting capability to evaluate how well an investing strategy would have worked in the past. Using a five-year historical period with quarterly rebalancing, the screen described had a 3.1-per-cent annualized return compared with 0.3 per cent for the S&P/TSX Composite Index.

The investment ideas presented here are for information only. They do not constitute advice or a recommendation by Trading Central in respect of the investment in financial instruments. Investors should conduct further research before investing.

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Select TSX stocks trading within 10 per cent of their 52-week highs 

RankCompanyTickerP/EMkt. Cap. ($ Bil.)Chg. from 52W High (%)YTD Price Perf. (%)1Y Price Perf. (%)4W Price Perf. (%)Div. Yld. (%)Recent Price ($)
1TMX Group Ltd.X-T29.07.3-7.116.643.515.12.0130.39
2Northland Power Inc.NPI-T16.86.4-0.621.131.10.03.732.89
3Canadian Tire Corp.CTC-A-T20.17.9-8.624.4-2.112.22.0123.97
4Metro Inc.MRU-T19.314.3-8.25.812.62.21.456.37
5Cdn. Pacific RailwayCP-T19.647.6-3.86.214.62.11.0351.34
6Ritchie Bros Auction.RBA-T30.16.3-6.54.1283.51.958.39
7Alim. Couche-Tard ATD-B-T17.048.8-4.07.44.13.50.743.78
8Cdn. Nat'l RailwayCNR-T19.286.1-5.52.9-1.52.41.9121.14
9WSP Global Inc.WSP-T38.59.4-9.70240.81.888.62
10Open Text Corp.OTEX-T40.915.8-7.42.69.00.61.758.47

Source: Trading Central 

Gary Christie is head of North American research at Trading Central in Ottawa.

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