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The S&P/TSX Composite leapt 1.4 per cent for the trading week ending with Thursday’s close and is now down 2.9 per cent for the year.

The benchmark’s Relative Strength Index (RSI) score of 49 puts it in technically neutral territory, almost exactly half way between the oversold buy signal of 30 and the RSI sell signal of 70.

There are nine oversold, technically attractive index member stocks this week. Bombardier Inc. tops the list, followed by Vermillion Energy Inc., Sleep Country Canada Holdings Inc., Guyana Goldfields Inc., Nuvista Energy Ltd., Tamarack Valley Energy Ltd., Altagas Ltd., Encana Corp., and ATS Automation Tooling Systems Inc..

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I considered ATS Automation as the focus chart this week because there’s a Credit Suisse economist expecting a rebound for the global auto sector, but I chose Bombardier in the end because it’s been more in the news.

Bombardier’s stock price has been sensitive to both RSI buy signals and the 200-day moving average trend line in the past 24 months. A March 2017 buy signal (the 200 day trend line appears to have provided price support at this time) forecast a 34-per-cent rally to August 2017. Buyers of the stock on the September 2017 RSI buy signal would have generated a massive 153-per-cent gain by July of 2018.

The problem is that selling pressure has been so intense since the summer that RSI buy signals have become less reliable. The stock price did manage a brief rally after an early September buy signal, but then headed directly south again soon after.

Bombardier’s stock knifed through the 200-day moving average in October without a pause. This suggests significant technical damage that makes the current buy signal less reliable. The picture may change if the price stabilizes, but blindly following the buy signal at this point is likely unwise.

Fundamental research is always a key component of any market transaction and investors should always factor the fundamental outlook into any market transaction.

There are nine overbought, technically vulnerable S&P/TSX Composite constituents by RSI this week, led by Home Capital Group Inc., Great Canadian Gaming Corp., Loblaw Companies Ltd., Uni-Select Inc., Canadian Tire Corp., Gildan Activewear Inc., Pason Systems Inc., Aecon Group Inc. and Fortis Inc. complete the list.

RSI Price 200DMA Return 1W % Return YTD % PE Ratio TTM PE Ratio Fwd
BBD.B-T BOMBARDIER INC-B 21.01574 2.41 4.2164 -27.19033 -20.46204 18.43177483 14.61713413
VET-T VERMILION ENERGY INC 22.10273 32.49 42.9437 -8.012453 -25.01107 21.75501251 18.97780374
ZZZ-T SLEEP COUNTRY CANADA HOLDING 22.23296 22.69 31.9712 -17.4008 -30.9507 13.92024573 12.31144872
GUY-T GUYANA GOLDFIELDS INC 22.30345 1.66 4.27435 -7.262572 -67.32284 9.649591152 3.626885255
NVA-T NUVISTA ENERGY LTD 23.51557 4.97 7.9786 -8.974362 -38.02993 11.4675719 10.68817204
TVE-T TAMARACK VALLEY ENERGY LTD 25.38794 3.11 3.8842 -12.1469 8.741255 31.02429966 18.1871345
ALA-T ALTAGAS LTD 25.62947 15.52 24.50425 -2.267 -41.66727 #N/A N/A 18.60911271
ECA-T ENCANA CORP 25.96577 11.44 15.71215 -3.050851 -31.52566 13.75954926 8.182299305
ATA-T ATS AUTOMATION TOOLING SYS 27.24628 17.89 19.4037 -9.18782 15.04823 29.7429527 17.94383149
RSI Price 200DMA Return 1W % Return YTD % PE Ratio TTM PE Ratio Fwd
HCG-T HOME CAPITAL GROUP INC 77.76814 17.3 14.7798 28.81608 -0.05777448 10.94037196 8.931337119
GC-T GREAT CANADIAN GAMING CORP 76.54607 51.95 42.74045 21.52047 53.74371 22.03370957 #N/A N/A
L-T LOBLAW COMPANIES LTD 76.12894 57.7 53.33027 10.16138 6.649384 18.3517171 12.04592902
UNS-T UNI-SELECT INC 74.3907 23.69 21.62835 5.102043 -15.48806 14.35537413 14.55476184
CTC.A-T CANADIAN TIRE CORP-CLASS A 73.78368 166.1 166.1841 10.02915 3.55327 14.8577118 13.36283186
GIL-T GILDAN ACTIVEWEAR INC 72.44624 42.24 38.08625 5.679264 5.223877 18.40080378 15.62921458
PSI-T PASON SYSTEMS INC 72.32455 22.59 19.6065 15.84615 27.5264 41.83333362 26.26744186
ARE-T AECON GROUP INC 71.469 19.67 17.31035 3.20042 0.9217897 23.0027272 17.48444444
FTS-T FORTIS INC 71.33475 45.09 42.36805 4.254335 0.8410872 17.2486212 17.07954545

Source: Scott Barlow/Bloomberg

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