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Domestic equities took a beating in the trading week ending with Thursday’s close, and the S&P/TSX Composite skidded downr by 3.0 per cent. The benchmark stands 5.7 per cent lower year-to-date.

In terms of technicals, the benchmark itself is again oversold according to Relative Strength Index (RSI). The TSX’s current RSI level of 22.8 is well below the buy signal of 30. The overbought RSI sell signal of 70 is a distant memory.

There is no shortage of oversold benchmark constituents this week – 48 of them – as we’d expect with the index in oversold territory. The 15 most oversold stocks are listed in the table below.

Story continues below advertisement

There are a lot of banks among the weakest stocks this week. This can happen when overall selling pressure gets intense because the bank stocks have the most liquidity and are the place sellers can find the most bids. I picked Royal Bank, the fourth most oversold company in the index, as the focus chart this week.

RSI buy signals have been reasonably successful in uncovering profitable buying opportunities for Royal Bank stock during the past 36 months. A series of oversold signal in mid-January 2016 forecasted a rally of more than 50 per cent in the following 12 months.

Another buy signal in February of this year was less useful as the price rallied a scant 4 per cent afterwards before heading lower.

In technical terms, Royal Bank looks attractive for patient investors if the January 2016 pattern is a precedent. At that point, the price repeatedly tested the lows and eventually headed sustainably higher. If, however, the price starts making lower lows, that would be a signal to stay away until the stock stabilizes.

The fundamental outlook for the bank could, of course, tell a different story and investors should always complete fundamental research before adding any position to their portfolio.

There is only one overbought, technically vulnerable index member this week trading above the RSI sell signal of 70, and that is InterRent REIT.

RSI PRICE 200DMA Return 1W % Return YTD % PE Ratio TTM PE Ratio Fwd
TRQ-T TURQUOISE HILL RESOURCES LTD 14.0526 2.11 3.5466 -13.16872 -50.81585 8.72282015 23.59471739
PD-T PRECISION DRILLING CORP 15.61531 3.25 4.38605 -14.47368 -14.69816 #N/A N/A #N/A N/A
FM-T FIRST QUANTUM MINERALS LTD 17.30783 10.93 18.3678 -15.53323 -37.89704 33.02388943 10.28608333
RY-T ROYAL BANK OF CANADA 20.95979 94.73 101.0637 -3.282794 -4.158765 11.59238084 10.72455564
TD-T TORONTO-DOMINION BANK 21.85035 72.44 75.24835 -2.503365 1.859449 11.83284497 10.6969876
BMO-T BANK OF MONTREAL 22.21774 99.72 101.56 -3.819443 1.939484 11.7787315 10.56132175
LUN-T LUNDIN MINING CORP 22.54317 4.94 7.6999 -9.689214 -40.20227 9.345246061 11.66574058
KEL-T KELT EXPLORATION LTD 22.59932 6.27 8.0308 -8.600583 -12.79555 #N/A N/A 48.23076923
TSX-I S&P/TSX COMPOSITE INDEX 22.75816 14924.08 15924.38 -3.037365 -5.698 16.38386403 14.46862179
CM-T CAN IMPERIAL BK OF COMMERCE 23.11183 113.25 117.203 -2.134463 -4.355464 9.555987879 9.150775695
SPB-T SUPERIOR PLUS CORP 23.32388 11.72 12.67875 -4.32653 3.034295 #N/A N/A 16.55367232
TCW-T TRICAN WELL SERVICE LTD 23.40851 1.74 3.05265 -10.30928 -57.35294 20.10700636 #N/A N/A
FRU-T FREEHOLD ROYALTIES LTD 23.44099 9.85 12.3938 -5.197305 -27.19739 #N/A N/A 43.39207048
ERF-T ENERPLUS CORP 23.50362 12.39 15.2651 -10.79914 1.240999 14.98720867 7.472858866
FTT-T FINNING INTERNATIONAL INC 23.66273 27.75 32.37325 -7.345576 -10.89711 16.79946823 14.11495422
ATA-T ATS AUTOMATION TOOLING SYS 23.93365 19.21 19.2929 -9.429519 23.53697 30.49409498 19.24849699
RSI PRICE 200DMA Return 1W % Return YTD % PE Ratio TTM PE Ratio Fwd
IIP-UN-T INTERRENT REAL ESTATE INVEST 76.38042 12.58 10.61415 4.571904 40.47332 5.561791783 #N/A N/A

Source: Bloomberg/Scott Barlow

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