The S&P/TSX Composite staged a decent comeback for the trading week ending with Thursday’s close, climbing 1.6 per cent. In terms of Relative Strength Index (RSI), the benchmark is neither overbought nor oversold, with a reading of 40 that is between the buy signal of 30 and the sell signal of 70.
There are 18 oversold, technically attractive index member companies, according to RSI, this week. MAXAR Technologies Ltd., after a hellacious week, is the most oversold stock in the benchmark. Altagas Ltd., Brookfield Renewable Partners, Precision Drilling Corp., Encana Corp., Guyana Goldfields Inc., Freehold Royalties Ltd., Nuvista Energy Ltd., Tamarack Valley Energy Ltd. and Bank of Montreal round out the top ten.
I was tempted to pick BMO as the focus chart, but, because I featured Royal Bank last week, Westshore Terminals Investments is the choice.
RSI buy signals and sell signals have been effective indicators during the past two years. In February of 2017, a sell signal effectively predicted a price decline of 33 per cent to May of that year. At that point, Westshore was dramatically oversold by RSI, and proceeded to rally 30 per cent by early September 2017.
A series of overbought sell signals in December of 2017 preceded a 21-per-cent slide in price before a March 9, 2018 RSI buy signal kicked off a 31-per-cent rally to late August.
Westshore’s stock price has also been sensitive to the 200-day moving average. In the August to November 2017 period and in June and July of this year, the price moved along the trend line.
Past technical patterns offer no guarantees of success, of course, but this is among the more promising charts we’ve looked at in recent months. As always, the fundamental outlook could tell a much different story and investors should always complete fundamental research before any market transaction.
The volatility of recent trading sessions has left only two overbought, technically vulnerable stocks by RSI – InterRent REIT and AeconGroup Inc.
Scott Barlow