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The S&P/TSX Composite jumped 4.9 per cent for the trading week ending with Thursday’s close.

According to Relative Strength Index (RSI), the benchmark is now closer to overbought levels than oversold. The RSI reading of 59 is still, however, in neutral territory between the buy signal of 30 and the sell signal of 70.

The market’s strong performance leaves no index constituents trading in the technically attractive zone below the RSI 30 target.

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I picked the benchmark’s most overbought, technically vulnerable member Granite REIT as the focus chart this week. The unit price has been reasonably sensitive to sell signals over the past 24 months.

An RSI sell signal in February 2017 successfully predicted a price correction to early March 2017, but the downward move was a mere 2.1 per cent. The unit price ignored a sell signal in April 2017, continuing higher, and a May sell signal was followed by one brief, sharp downdraft before rising again.

More recently, a June 2018 sell signal was followed by a marginal drop in price and a period of stagnant price action. More ominously, a September RSI sell signal predicted a more serious 7.7-per-cent decline.

Granite REIT hasn’t shown enough volatility in the past 24 months that current unitholders should be concerned about a major downdraft, but investors considering purchasing the trust should likely wait until overbought conditions subside.

There are six S&P/TSX constituents registering as overbought by RSI this week in addition to Granite. Badger Daylighting Ltd. is the second-most overbought company in the index, followed by Laurentian Bank of Canada, Kinder Morgan Canada Ltd., MAG Silver Corp., Enerflex Ltd. and Innergex Renewable Energy Inc.

NAME RSI Price 200DMA Return 1W % Return YTD % PE Ratio TTM PE Ratio Fwd
GRT-UN-T GRANITE REAL ESTATE INVESTME 73.16264 56.99 53.46039 4.983389 6.8972 19.11438636 #N/A N/A
BAD-T BADGER DAYLIGHTING LTD 72.95355 35.63 29.075 11.01377 10.0155 17.3066018 16.12217195
LB-T LAURENTIAN BANK OF CANADA 72.39489 43.65 44.52205 12.48713 14.76228 8.040254232 8.444573418
KML-T KINDER MORGAN CANADA LTD 71.27592 14.84 14.74156 1.043136 3.072879 17.8360438 7.737226277
MAG-T MAG SILVER CORP 70.59247 10.84 11.78047 3.317536 9 #N/A N/A #N/A N/A
EFX-T ENERFLEX LTD 70.49368 17.35 15.5959 9.7867 9.511889 15.18979839 13.75892149
INE-T INNERGEX RENEWABLE ENERGY 70.17142 13.79 13.2114 6.235566 10.04785 53.28088944 #N/A N/A

Source: Bloomberg/Scott Barlow

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