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The S&P/TSX Composite climbed 0.5 per cent for the shortened trading week ending with Thursday’s close and sits lower by 0.8 for the first few days of 2019. The benchmark’s Relative Strength Index (RSI) of 39 is in neutral technical territory between the RSI Buy signal of 30 and the overbought sell signal of 70.

There are seven index members trading at attractive technical levels according to RSI this week. TSI International Inc. is the most oversold company in the benchmark, followed by Brookfield Business Partners, Transalta Corp., CIBC, Sleep Country Canada Holdings, WSP Global Inc. and Lucara Diamond Corp.

I picked Transalta Corp. (TA-T) as the focus chart this week and the results are promising, although with a caveat. The stock’s price has consistently responded to RSI buy signals over the past 24 months. A November 2016 buy signal was followed quickly by a 56 per cent price rally to January 2017. A buy signal in April 2017 successfully predicted a 20 per cent rally to early July.

In 2018, a February buy signal led to a quick 16.5-per-cent appreciation in the following weeks but importantly, the 200-day moving average trend line acted as resistance to further gains and the stock declined again.

The past performance history (no guarantee of future results, of course) suggests that Transalta will rally from current oversold conditions. If March 2018 is precedent, there is a risk a recovery could be halted as the price hits the 200-day moving average.

There are eight overbought, technically vulnerable S&P/TSX Composite constituents, all of them from the precious metals sector. The table with the details is below.

This column is confined to technical analysis but investors should always complete fundamental research before any market transactions.

Open this photo in gallery:

RSI Barlow 0104

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

Most oversold stocks on the TSX
Company Ticker RSI Price ($) 200DMA Return 1Wk (%) Return YTD (%) PE Ratio TTM PE Ratio Fwd
TFI INTERNATIONAL INC. TFII-T 23.84 33.85 41.3 -2.55 -4.25 12.49 9.50
BROOKFIELD BUSINESS PT BBU-UN-T 25.76 41.03 50.9 -5.55 -2.21 N/A 6.95
TRANSALTA CORP TA-T 28.17 5.83 7.0 4.86 4.29 N/A N/A
CIBC CM-T 28.18 102.96 115.2 0.85 0.24 8.54 8.21
SLEEP COUNTRY CANADA HOLDING ZZZ-T 28.83 19.07 29.7 -2.16 -4.81 11.70 10.12
WSP GLOBAL INC WSP-T 28.87 57.26 66.5 -1.68 -3.60 21.14 15.49
LUCARA DIAMOND CORP LUC-T 29.66 1.43 2.1 -1.40 -4.73 34.79 8.19
Most overbought stocks on the TSX
Company RSI Price 200DMA Return 1Wk (%) Return YTD % PE Ratio TTM PE Ratio Fwd
ALACER GOLD CORP ASR-T 78.05 2.6 2.3 8.80 7.94 46.01 14.88
OSISKO GOLD ROYALTIES LTD OR-T 76.59 12.09 11.5 4.33 2.76 283.14 78.51
ENDEAVOUR MINING CORP EDV-T 76.23 22.16 21.3 3.50 1.84 65.36 17.90
OCEANAGOLD CORP OGC-T 75.06 4.77 3.7 2.96 -2.21 11.35 18.98
SANDSTORM GOLD LTD SSL-T 73.05 6.38 5.6 4.20 2.06 84.56 49.97
SEMAFO INC SMF-T 71.02 3.08 3.3 14.08 7.12 N/A 7.49
KIRKLAND LAKE GOLD LTD KL-T 70.68 35.02 25.9 1.98 1.40 23.36 17.75
TOREX GOLD RESOURCES INC TXG-T 70.53 12.95 11.3 5.45 2.69 N/A 14.94

Source: Bloomberg

Scott Barlow, Globe Investor’s in-house market strategist, writes exclusively for our subscribers at Inside the Market.

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Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 27/05/24 4:00pm EDT.

SymbolName% changeLast
TA-T
Transalta Corp
+0.1%9.71

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