The S&P/TSX Composite fell 1.6 per cent for a tough trading week ending with Thursday’s close. It has not been a great year for investors so far as the benchmark now sits a mere 1.3 per cent higher for the year.
In terms of technicals, the index’s current Relative Strength Index (RSI) level of 37 is much closer to the oversold buy signal of 30 than the overbought RSI sell signal of 70.
There are 37 index stocks trading at attractive RSI levels below the buy signal – the top 15 most oversold companies stocks are in the table below.
Tahoe Resources Inc. is the most oversold stock in the index, followed by Wheaton Precious Metals Corp., Laurentian Bank of Canada, Crescent Point Energy Corp., and Advantage Oil and Gas Ltd. Other notable oversold names include Shaw Communications Inc. (B), Saputo Inc. and IGM Financial Inc.
I chose ONEX Corp for the focus chart this week largely because I was surprised that a cash-heavy diversified holding company was on the oversold list.
The ONEX chart is not easy to judge. It depends on whether an ‘almost oversold’ reading of 32 in January 19, 2017 counts as a successful signal because the stock rallied 21 per cent to early July 2017.
I normally wouldn’t mention an "almost," but it might be relevant here because ONEX looks like a case where buy signals are reliable when the stock is trading above the 200-day moving average, and not trustworthy when the price is below the trend line.
It is definitely the case that the most recent buy signals in November 2017, January 2018 and February 2018 were not good times to buy ONEX, as further declines soon followed. The stock remains below the 200-day line so the current buy signal is thus not a reliably optimistic indicator.
Fundamental analysis, as always, could provide a much more compelling buy case and investors should always complete fundamental research before any transaction.
There are 13 overbought, technically vulnerable index members this week according to RSI. Enercare Inc. is the most extended stock in the benchmark followed by Nevsun Resources Ltd., Aphria Inc., Thomson Reuters Corp., CIBC and Alimentation Couche-Tard Inc. (B).