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

The S&P/TSX Composite climbed 0.5 per cent for the trading week ending with Thursday’s close, and the benchmark now stands 6.9 per cent higher for 2019, almost erasing the loss in 2018.

In technical terms, the index remains at the higher end of the neutral range with a reading of 65 that is between the Relative Strength Index (RSI) buy signal of 30 and the overbought sell signal of 70.

There is only one technically attractive oversold benchmark stock, MEG Energy Corp., trading with an RSI below the buy signal of 30 this week. Unfortunately, MEG is a stock specific, investment banking-related case where technical analysis is unlikely to help uncover a profitable entry point.

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I chose Bank of Montreal, an overbought technically vulnerable stock, as the focus chart.

BMO’s RSI level is just above the RSI sell signal of 70.

Sell signal have been largely unreliable in identifying price corrections for BMO stock – rallies continued after sell signals in December 2016, October 2017 and May 2018 - but I think it’s a very important chart because of the 200-day moving average trend line.

The stock price fell below the trend line in October 2018 during a period when domestic bank stocks underperformed (for reasons that remain largely unexplained). In BMO’s case, the price bottomed on December 24, and has recovered 12 per cent.

The price has been sensitive to the 200-day moving average in the past 36 months, notably in the January-February 2016, May to August 2017 and February to April 2018 time frames. The late October to early December portion of the chart is open to interpretation, but one credible reading is that the trend line was acting as resistance to a rally.

BMO is now trading just below the 200-day average and its reaction if it reaches the line will be interesting. If the trend line acts as resistance, and the price heads lower, this would suggest further weak returns for BMO, and by extension for the sector as a whole. A move significantly and sustainably above the line would be a very positive sign for future returns.

There are 14 S&P/TSX Composite stocks joining BMO on the overbought list this week. Alacer Gold Corp. is the most overbought stock in the index, followed by Restaurant Brands International, Intertape Polymer Group Inc., Canadian Utilities Ltd. and Canopy Growth Corp.

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This column is solely concerned with technical analysis, but investors should always complete fundamental research before any market transactions.

RSI Price 200DMA Return 1W % Return YTD % PE Ratio TTM PE Ratio Fwd
MEG-T MEG ENERGY CORP 25.91395 5.24 8.582025 -4.727273 -32.03632 #N/A N/A #N/A N/A
NAME RSI Price 200DMA Return 1W % Return YTD % PE Ratio TTM PE Ratio Fwd
ASR-T ALACER GOLD CORP 78.93247 3.04 2.3586 13.43284 20.63492 54.46460552 8.740529989
QSR-T RESTAURANT BRANDS INTERN 77.34101 84.97 75.65845 11.80263 19.13909 24.80360334 23.97285904
ITP-T INTERTAPE POLYMER GROUP INC 76.83575 19.82 18.20992 4.206099 17.13948 12.51194804 12.87096579
CU-T CANADIAN UTILITIES LTD-A 75.59454 33.92 32.00917 2.446391 8.301405 13.51305519 14.77995643
WEED-T CANOPY GROWTH CORP 74.97208 59.02 44.8129 3.598385 61.21278 #N/A N/A #N/A N/A
MTY-T MTY FOOD GROUP INC 74.40319 71.53 58.37345 4.255939 17.95844 26.22646155 22.14551084
INE-T INNERGEX RENEWABLE ENERGY 74.17273 14.3 13.25005 3.025937 14.03509 55.25139458 #N/A N/A
CRON-T CRONOS GROUP INC 72.90423 21 #N/A N/A 15.70248 46.03616 #N/A N/A #N/A N/A
CRR-UN-T CROMBIE REAL ESTATE INVESTME 71.19705 13.64 12.94835 1.639344 8.945687 27.93879753 #N/A N/A
BAD-T BADGER DAYLIGHTING LTD 71.14064 36.29 29.6367 -0.08259912 12.52713 17.62718429 16.42081448
CG-T CENTERRA GOLD INC 71.08474 6.66 6.12615 7.246377 13.65188 8.833885413 9.205411388
CAE-T CAE INC 71.05334 27.66 25.90815 4.102371 10.24312 24.04272394 20.18978102
GRT-UN-T GRANITE REAL ESTATE INVESTME 71.0333 58.37 53.84499 0.4993113 9.697425 19.57723598 #N/A N/A
FSV-T FIRSTSERVICE CORP 70.31036 104.96 99.8593 4.740046 12.02903 42.38740925 27.26410835
BMO-T BANK OF MONTREAL 70.04788 96.8 100.2407 1.149425 8.532347 10.94534081 10.11177269
SIA-T SIENNA SENIOR LIVING INC 70.00559 17.3 16.88745 2.731591 9.911055 45.43067027 #N/A N/A

Source: Scott Barlow/Bloomberg

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