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Inside the Market The week’s most oversold and overbought stocks on the TSX

The S&P/TSX Composite dropped a painful 1.6 per cent for the trading week ending with Thursday’s close and now sits 5.3 per cent lower for the year.

Technically, the benchmark is in neutral territory by Relative Strength index (RSI) with a reading of 41 that is between the buy signal of 30 and the RSI overbought sell signal of 70.

There are 25 oversold, technically attractive index stocks trading below the RSI buy signal this week. Energy companies dominate the list, but major banks – Canadian Western Bank, Canadian Imperial Bank of Commerce and Bank of Montreal - are also on the list.

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NuVista Energy Ltd. is the most oversold company in the benchmark, followed by Richelieu Hardware Ltd., Boardwalk REIT, Lucara Diamond Corp., and Whitecap Resources Inc.

I picked Bank of Montreal for the focus chart this week for its prominence in the Canadian market. The good news is that RSI buy signals have generally worked well in uncovering profitable entry points for the stock over the past three years. The bad news is that buy signals have not worked at all more recently.

A buy signal in January of 2016 successfully forecast a 46-per-cent rally (not including dividends) to March of 2017. A May 2017 buy signal predicted a weaker rally before further price weakness, but another RSI buy signal in September 2017 was followed by an 18-per-cent appreciation by late January 2018.

More recently, BMO’s price stopped falling after a buy signal in October 2018 but failed to rally. The stock went sideways before getting caught up in the December sell-off that also hit U.S. bank stocks.

I don’t fully trust the current buy signal, but I’m taking it seriously at the same time. The longer-term history, combined with a positive fundamental outlook (as always, fundamental research needs to be part of every market transaction), might make BMO an interesting candidate for further study here.

There are 11 overbought, technically vulnerable S&P/TSX Composite constituents by RSI this week, led by Hydro One Ltd. The list is primarily made up of defensive market sectors, as highlighted by Loblaw Companies Ltd., Emera Inc., Metro Inc., BCE Inc. and Telus Corp.

RSI Price 200DMA Return 1W % Return YTD % PE Ratio TTM PE Ratio Fwd
NVA-T NUVISTA ENERGY LTD 22.56576 3.66 7.56255 -13.71571 -56.85786 6.195535297 8.261851016
RCH-T RICHELIEU HARDWARE LTD 23.49501 22.99 28.57235 -11.36802 -32.34968 19.26147836 #N/A N/A
BEI-UN-T BOARDWALK REAL ESTATE INVEST 23.98317 40.82 46.70725 -2.554309 -3.3724 9.896441256 #N/A N/A
LUC-T LUCARA DIAMOND CORP 25.33222 1.68 2.1159 -10.90425 -38.23949 41.39837454 9.740768218
WCP-T WHITECAP RESOURCES INC 25.66738 4.58 7.9916 -7.82241 -49.41066 12.47833979 17.41444867
CMG-T COMPUTER MODELLING GROUP LTD 25.79753 6.05 8.9743 -6.327641 -34.05526 24.53196735 21.45390071
RUS-T RUSSEL METALS INC 26.12168 22.36 27.64815 -5.670996 -21.12113 6.865122938 7.631399317
VII-T SEVEN GENERATIONS ENERGY - A 26.1744 9.75 15.03785 -7.360157 -46.90664 6.203027968 7.111597374
CWB-T CANADIAN WESTERN BANK 26.62461 26.82 34.26805 -7.45751 -30.54195 9.074628055 8.396994364
BMO-T BANK OF MONTREAL 26.84846 94.04 101.1999 -5.495169 -3.073853 10.63326268 9.796853839
SES-T SECURE ENERGY SERVICES INC 27.14371 7.14 7.9577 -5.21262 -18.62428 364.7323185 40.11235955
PSK-T PRAIRIESKY ROYALTY LTD 27.55776 17.28 24.7987 -5.022573 -45.97186 36.08623249 57.21854305
ALA-T ALTAGAS LTD 27.62505 13.97 23.32325 -2.285714 -47.99098 #N/A N/A 19.03269755
CM-T CAN IMPERIAL BK OF COMMERCE 27.91727 108.55 116.2999 -4.019207 -8.83999 9.00299434 8.619868181
NFI-T NFI GROUP INC 27.93608 35.29 50.8447 -5.184393 -32.9309 9.907930699 9.779351005
ECA-T ENCANA CORP 27.96024 8.91 15.2337 -6.918919 -48.46468 10.6535692 6.973947873
LB-T LAURENTIAN BANK OF CANADA 28.31621 39.67 45.7108 -6.861107 -28.09838 7.307144547 7.674598568
ONEX-T ONEX CORPORATION 28.4321 78.5 91.82275 -4.833395 -15.12369 #N/A N/A 169.0553396
PEY-T PEYTO EXPLORATION & DEV CORP 28.52346 9.57 10.8686 -9.720885 -33.71215 9.945150668 17.62430939
AAV-T ADVANTAGE OIL & GAS LTD 28.8516 2.34 3.7254 -10.9375 -57.77778 #N/A N/A 19.02439024
KEL-T KELT EXPLORATION LTD 28.96613 4.35 7.67815 -7.572381 -42.28094 #N/A N/A 241.6666667
TVE-T TAMARACK VALLEY ENERGY LTD 29.00723 2.24 3.85675 -10 -27.62238 23.02560581 20
PD-T PRECISION DRILLING CORP 29.31017 2.93 4.20185 -8.766233 -26.24672 #N/A N/A #N/A N/A
POU-T PARAMOUNT RESOURCES LTD -A 29.4829 7.15 14.0175 -5.608755 -64.46962 #N/A N/A #N/A N/A
ARX-T ARC RESOURCES LTD 29.95413 9.13 13.3492 -2.404372 -36.87026 16.89855153 15.66037736
RSI Price 200DMA Return 1W % Return YTD % PE Ratio TTM PE Ratio Fwd
H-T HYDRO ONE LTD 83.6171 21.35 19.8594 9.511699 -0.5605396 16.6796878 16.11320755
KL-T KIRKLAND LAKE GOLD LTD 76.73621 30.04 24.7681 11.14391 56.83017 20.2939464 17.14053569
L-T LOBLAW COMPANIES LTD 76.41846 61.84 54.04634 1.141364 14.6527 19.6343827 13.86547085
EMA-T EMERA INC 76.1359 45.37 41.22395 1.183036 1.846138 34.1660082 16.67401691
MRU-T METRO INC 75.49612 46.345 42.1603 0.2620087 16.13742 19.11652779 16.10879388
GIL-T GILDAN ACTIVEWEAR INC 73.42774 44.27 38.338 4.102564 11.64365 19.17174865 16.26938519
CUF-UN-T COMINAR REAL ESTATE INV-TR U 73.02374 11.92 12.23345 12.62959 -12.03305 10.32053403 #N/A N/A
SRU-UN-T SMARTCENTRES REAL ESTATE INV 72.85376 32.15 30.07725 2.843451 9.88232 17.31065245 #N/A N/A
BCE-T BCE INC 72.81683 57.26 54.2326 0.6127451 -0.7835789 16.97056153 15.58943643
T-T TELUS CORP 71.89488 48.11 46.5069 0.862069 4.11085 18.98495434 15.88312975
TRI-T THOMSON REUTERS CORP 70.36514 68.29 55.51368 2.604637 28.34399 60.08692502 57.57671381

Source: Bloomberg/Scott Barlow

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