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The S&P/TSX Composite slid 0.5 per cent for the trading week ending with Thursday’s close, and stands a scant 0.8 per cent for 2018. The benchmark as a whole is approaching oversold levels with a Relative Strength Index (RSI) level of 33 that is close to the buy signal of 30.

There are 18 oversold, technically attractive index constituents this week led by Transcontinental Inc. and Stars Group Inc. Turquoise Hill Resources Inc. and Laurentian Bank of Canada are next on the list followed by a host of precious metals and energy stocks.

I picked Canadian Tire Corp. for the focus chart after it fell 2.6 per cent in the past week. The stock looks like a case where the 200-day moving average determines the reliability of RSI buy signals.

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Canadian Tire was enduring a rapid sell-off in the May to August 2017 time frame, so it’s not that concerning that only marginal rallies and further declines occurred after RSI buy signals – it’s generally best to stay out of the way when any stock is falling hard.

A buy signal in February 2018 was far more profitable as the price immediately jumped 10 per cent in the following two weeks. A May 2018 buy signal was also effective as the price climbed 12.2 per cent to early August. Importantly, in both these cases the price was above the 200-day moving average trend line.

The 200-day line has often provided price support in the past two year. Examples include Feb. 3, 2017, June 2017 (briefly and unsuccessfully – further weakness followed) and May 2018 (twice). Unfortunately, Canadian Tire’s stock price is firmly below the trend line now which makes the current RSI buy signal untrustworthy.

Fundamental research may, however, uncover a more bullish story and investors should always complete fundamental analysis before any market transaction.

There are 13 overbought, technically vulnerable benchmark stocks this week according to RSI. Enercare Inc. is the frothiest company in the S&P/TSX Composite followed by Nevsun Resources Ltd., Canadian Apartment REIT, ATS Automation Tooling Systems and Parkland Fuel Corp.

Oversold stocks RSI Price 200DMA Return 1W % Return YTD % PE Ratio TTM PE Ratio Fwd
TCL.A-T TRANSCONTINENTAL INC-CL A 13.75009 24.62 27.83675 -17.6035 0.8483514 7.549340809 8.687367678
TSGI-T STARS GROUP INC/THE 20.42583 31.21 38.0017 -4.598061 4.273504 15.83985701 12.52803401
TRQ-T TURQUOISE HILL RESOURCES LTD 21.72477 2.79 3.75635 -4.79452 -35.19814 11.62947114 23.25085341
LB-T LAURENTIAN BANK OF CANADA 22.61512 42.4 49.54855 -0.9566011 -22.81705 7.189618992 8.164837281
WPM-T WHEATON PRECIOUS METALS CORP 24.14957 20.71 26.6549 -1.909308 -25.04351 19.3884257 26.15856585
IMG-T IAMGOLD CORP 24.69753 4.81 7.0264 -4.191613 -34.51569 32.97272846 25.60973629
PPL-T PEMBINA PIPELINE CORP 26.09003 42.9 43.5949 -1.6033 -2.323255 20.71728228 16.01343785
AAV-T ADVANTAGE OIL & GAS LTD 26.96609 3.265 4.202 -5.83287E-07 -39.44445 #N/A N/A 28.89380531
CTC.A-T CANADIAN TIRE CORP-CLASS A 27.02947 156.59 168.9625 -2.626524 -2.59715 15.19113692 13.11693751
WN-T WESTON (GEORGE) LTD 27.32252 97.35 105.687 -0.4429679 -8.590432 18.95119556 13.12348342
MTL-T MULLEN GROUP LTD 27.66487 14.78 15.23495 -5.566217 -3.734079 32.86964391 19.94601889
CNQ-T CANADIAN NATURAL RESOURCES 27.87827 41.86 43.8775 -2.494203 -4.888375 22.38985226 10.71136131
THO-T TAHOE RESOURCES INC 27.89627 3.58 5.893275 4.678362 -40.63018 #N/A N/A #N/A N/A
CG-T CENTERRA GOLD INC 28.413 5.15 6.7046 -3.984821 -21.42857 6.415928985 5.656845645
TCW-T TRICAN WELL SERVICE LTD 29.04504 2.45 3.33685 -9.62963 -40.19608 28.31158981 18.01470588
IGM-T IGM FINANCIAL INC 29.25463 35.58 39.92685 -0.6426338 -17.0205 11.59496295 10.14542344
SU-T SUNCOR ENERGY INC 29.46832 50.365 48.4848 -3.387534 10.58496 20.35861793 13.59012412
SLF-T SUN LIFE FINANCIAL INC 29.59155 50.54 52.9458 -2.176447 -0.3584232 11.43003973 10.46593498
TOG-T TORC OIL & GAS LTD 29.60174 6.35 7.11435 -0.4680187 -13.35469 49.79103373 20.81967213
Overbought stocks RSI Price 200DMA Return 1W % Return YTD % PE Ratio TTM PE Ratio Fwd
ECI-T ENERCARE INC 85.57588 28.88 20.054 0.1146792 46.27851 42.66950218 33.58139535
NSU-T NEVSUN RESOURCES LTD 85.44901 5.79 3.744 -0.8561651 89.21568 #N/A N/A 105.6943557
CAR-UN-T CAN APARTMENT PROP REAL ESTA 80.53352 48.96 39.56195 3.908589 33.25987 29.77113385 #N/A N/A
ATA-T ATS AUTOMATION TOOLING SYS 79.95029 23.92 18.2679 7.969381 54.21222 37.97078548 23.96793587
PKI-T PARKLAND FUEL CORP 78.01218 42.88 31.36635 4.629626 63.92952 27.14248797 #N/A N/A
GRT-UN-T GRANITE REAL ESTATE INVESTME 77.34455 57.39 51.78945 3.207205 20.44478 18.32884009 #N/A N/A
SW-T SIERRA WIRELESS INC 74.58443 28.32 23.16935 13.85737 9.338521 #N/A N/A 20.0302555
AP-UN-T ALLIED PROPERTIES REAL ESTAT 74.5408 45.3 42.01285 3.645481 10.8337 25.77018977 #N/A N/A
TRI-T THOMSON REUTERS CORP 73.69314 58.99 53.22565 0.5251567 11.10998 35.5278362 70.88922683
CPX-T CAPITAL POWER CORP 72.95633 28.67 24.97615 2.944345 21.05833 27.33655048 18.59273671
LUC-T LUCARA DIAMOND CORP 72.64704 2.25 2.258 7.373269 -14.08837 15.59915046 12.59170305
TXG-T TOREX GOLD RESOURCES INC 70.82584 10.28 11.2874 12.70537 -13.74686 #N/A N/A 14.30421529
BBU-UN-T BROOKFIELD BUSINESS PT-UNIT 70.66322 58.46 48.65755 3.103816 34.15466 #N/A N/A 8.910731306

Source: Bloomberg/Scott Barlow

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