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The S&P/TSX Composite surged 1.0 per cent for the trading week ending with Thursday’s close and is now up 14.8 per cent for the year.

In terms of technical analysis, the benchmark’s current Relative Strength Index (RSI) of 65 puts it in the upper end of the neutral range, closer to the overbought sell signal of 70 than the oversold buy signal of 30.

There is only one technically attractive oversold S&P/TSX Composite stock by RSI this week, Peyto Exploration and Development Corp.

But, as I’ve mentioned previously, technical analysis works less well on commodity stocks because price action is more influenced by the commodity price than individual stock characteristics.

I picked an overbought, technically vulnerable company (by RSI) for the focus chart this week, auto repair franchise operator Boyd Group Income Fund. The trust has been on a tear, climbing 31.2 per cent year to date.

Investors thinking about buying Boyd Group might want to hold on and wait for some of the frothiness burns off, but it doesn’t look like existing holders need to worry about the current RSI sell signal too much.

Even the cases where the price declined after sell signals in the past three years – August 2016 and June 2017 – the short term losses were not sizeable. Sell signals in December 2017 , June 2018, and more recently on March 21 of this year, were followed only by pauses in the rally and not drops.

Boyd Group has been sensitive to the 200-day moving average trend line. The 200-day provided price support from February to March 2017 and again in September and November 2017. Interestingly, the price dropped below the trend line in November 2018, made one failed attempt to recover above it, and then surged through in January 2019.

Fundamental research is important for investors in this case to verify that, after such a great rally, the future earnings growth prospects are accurately reflected in the price.

Elsewhere in the overbought category, Descartes Systems Group is the most overbought stock in the index followed by Transalta Corp., Transalta Renewables Inc., Power Corp of Canada and Emera Inc.

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RSIPrice200DMAReturn 1W %Return YTD %PE Ratio TTMPE Ratio Fwd
PEY-TPEYTO EXPLORATION & DEV CORP26.958316.459.41165-8.898305-8.1492478.14309605513.81156317
RSIPrice200DMAReturn 1W %Return YTD %PE Ratio TTMPE Ratio Fwd
DSG-TDESCARTES SYSTEMS GRP/THE77.3761351.4342.061656.41423642.7421681.1801706125.4327973
TA-TTRANSALTA CORP77.193899.877.2862-0.604229677.44702#N/A N/A#N/A N/A
RNW-TTRANSALTA RENEWABLES INC77.1792313.8211.758851.76730535.8889215.0146231716.16374269
POW-TPOWER CORP OF CANADA76.8832631.9127.825652.17739331.8225110.326713749.53961136
EMA-TEMERA INC74.6631250.6343.497250.676078717.3109917.9216548217.72138607
BYD-UN-TBOYD GROUP INCOME FUND74.00024148.08121.44866.08209831.2413837.1843459728.87675507
CU-TCANADIAN UTILITIES LTD-A73.5108937.3332.614851.71662120.6751914.8051443316.89904934
CCA-TCOGECO COMMUNICATIONS INC73.001887.0570.1892.14738333.2773611.9983276813.11981914
GWO-TGREAT-WEST LIFECO INC72.7766133.0330.67682.5776418.810537.15272238310.70664506
T-TTELUS CORP72.5933149.6846.97730.0805801711.0524118.8708559316.66554847
DIR-UN-TDREAM INDUSTRIAL REAL ESTATE72.5287912.0510.367951.68776428.561368.201435551#N/A N/A
SAP-TSAPUTO INC72.0356845.6941.11040.417582417.0278827.2001677823.87147335
BAD-TBADGER DAYLIGHTING LTD71.8547742.2232.206254.24691331.3932822.9292783418.41255997
ATD-B-TALIMENTATION COUCHE-TARD -B71.5715980.1266.47592.19387718.1702917.7101507918.29005239
SJ-TSTELLA-JONES INC71.1365744.9842.87951.07526913.9106322.7171714917.79976256
PWF-TPOWER FINANCIAL CORP71.0548932.0129.108953.39147325.7489310.196605069.174548581

Source: Bloomberg/Scott Barlow

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