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The S&P/ TSX Composite finished more or less flat for the trading week ending with Thursday’s close, easing higher by less than one tenth of a percentage point.

The benchmark remains overbought, according to Relative Strength Index (RSI), with a reading of 70.3 that is just above the RSI sell signal of 70. The index stands 12.1 per cent higher for the year.

The list of technically attractive, oversold stocks trading with RSIs below the buy signal of 30 is led by Uni-Select Inc., but otherwise dominated by forestry stocks. Cascades Inc., Canfor Corp. and West Fraser Timber Co. Ltd. are all there.

I chose Cascades as the focus chart this week, and it’s an interesting one. RSI buy signals have been reasonably successful in uncovering profitable buying opportunities over the past 36 months. In November 2016, a buy signal was followed by a whopping 64-per-cent rally to July of the following year.

The next buy signal in August 2017 didn’t work quite so well – a 14.6-per-cent rally occurred in the next month, but the price headed due south quickly after the short term peak was hit. A November 2017 RSI buy signal was followed by a 29.3-per-cent rally before the end of February 2018.

Two buy signals in April 2018 were ineffective as the price continued lower. Cascades was oversold through October 2018 and the subsequent rally was significant until the price hit the 200-day moving average trend line after which further weakness occurred.

The chart suggests that while Cascades stock could rally from here, resistance from the 200-day moving average could be a problem. Rallies were seemingly halted in March, August and December after the price failed to breach the trend line.

As always, investors should complete fundamental research – which could tell a complete different story than technical analysis - before making any market transactions.

There are 31 overbought, technically vulnerable S&P/TSX Composite members this week. Enerflex Ltd. is the frothiest stock in the index according to RSI, followed by Altagas Ltd., Descartes Systems Group, Cogeco Communications Inc. and Power Corp of Canada.

Staff

RSI Price200DMAReturn 1W %Return YTD %PE Ratio TTMPe Ratio Fwd
UNS-TUNI-SELECT INC22.7488112.7420.6099-4.848485-35.291098.6078416611.54383392
CAS-TCASCADES INC25.093728.7511.667-12.33831-13.8807410.922236178.429672447
WPK-TWINPAK LTD25.4458342.9946.4439-11.37068-10.219919.3616212718.56523543
MTY-TMTY FOOD GROUP INC27.9897959.0160.66315-0.6756757-2.80445814.2566221818.4810523
CFP-TCANFOR CORP28.5650314.3223.902-9.648562-14.458564.124512979.371727749
WFT-TWEST FRASER TIMBER CO LTD30.056565.8878.03895-4.101274-3.9590756.3775408769.813794131
RSI Price200DMAReturn 1W %Return YTD %PE Ratio TTMPe Ratio Fwd
EFX-TENERFLEX LTD81.8524320.1915.9431511.4827225.1564518.6523907114.1883345
ALA-TALTAGAS LTD79.8048817.6720.4285512.6125628.59841#N/A N/A20.54651163
DSG-TDESCARTES SYSTEMS GRP/THE79.3483545.6841.08451.97442226.1448883.0056241226.38286269
CCA-TCOGECO COMMUNICATIONS INC78.805282.2968.18058.77726425.9895911.3422442412.70888031
POW-TPOWER CORP OF CANADA78.2545728.15527.83021.5913214.512847.5838916828.762838469
PWF-TPOWER FINANCIAL CORP77.84829.4229.312.29885113.7049910.562478968.675906812
TIH-TTOROMONT INDUSTRIES LTD77.3350170.0360.49345-1.02586326.2440129.4045273619.36670354
BMO-TBANK OF MONTREAL77.14289103.16100.36144.21448116.2540211.4095056410.56858928
EIF-TEXCHANGE INCOME CORP76.7723833.431.498050.93699519.5781314.7086807310.79508727
ACO-X-TATCO LTD -CLASS I76.7286544.8439.447554.13825514.711228.27527815214.33045702
SMF-TSEMAFO INC76.694253.633.18194.22535225.42373#N/A N/A8.398969225
BCE-TBCE INC75.7018858.6954.550951.0882718.51103316.7344471116.55571227
NVU-UN-TNORTHVIEW APARTMENT REAL EST75.2803327.8326.06523.36842514.505815.32184402#N/A N/A
CU-TCANADIAN UTILITIES LTD-A74.1394335.5532.004153.79709313.1107614.0991921816.18115612
TCN-TTRICON CAPITAL GROUP INC73.9789411.110.647152.89179113.828699.17695473911.2276405
OR-TOSISKO GOLD ROYALTIES LTD73.6813114.6911.52270.340136123.22473617.51227866.17117117
KML-TKINDER MORGAN CANADA LTD73.6716515.4214.609061.1213727.58076811.2068259422.4127907
KEY-TKEYERA CORP73.1917232.3132.8920513.8759626.4534422.3942986219.32416268
BAM-A-TBROOKFIELD ASSET MANAGE-CL A73.0282760.0755.21372.14296914.0127913.05053592#N/A N/A
D-U-TDREAM OFFICE REAL ESTATE INV72.3470324.7323.8584.95067912.2687515.64100913#N/A N/A
CAR-UN-TCAN APARTMENT PROP REAL ESTA72.3390350.3845.297554.77378413.9649232.0391344723.54205607
TRP-TTRANSCANADA CORP71.7976559.1254.730250.34100620.7179515.3082689615.26465272
BAD-TBADGER DAYLIGHTING LTD71.5839538.1330.87631.4459918.8365818.520929717.62829404
CVE-TCENOVUS ENERGY INC71.4950412.1411.813855.05226525.625#N/A N/A27.97235023
SAP-TSAPUTO INC71.4749242.9440.962153.0019219.44118425.5630379122.43469175
SHOP-TSHOPIFY INC - CLASS A71.24876251.3199.29265.55555532.04089#N/A N/A525.2318281
GRT-UN-TGRANITE REAL ESTATE INVESTME70.8888861.8955.054970.398628516.7624220.75784042#N/A N/A
MAG-TMAG SILVER CORP70.8028912.8311.373152.05696229#N/A N/A#N/A N/A
TSX-IS&P/TSX COMPOSITE INDEX70.316116099.5315707.960.0935025712.1582917.6839200515.14734073
KL-TKIRKLAND LAKE GOLD LTD70.1192247.429.67720.83822335.1685428.0946059716.36828136
TA-TTRANSALTA CORP70.026838.17.002056.76392644.00716#N/A N/A#N/A N/A

Source: Bloomberg/Scott Barlow

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