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A sign board displaying Toronto Stock Exchange (TSX) stock information is seen in Toronto.

Mark Blinch/Reuters

The S&P/TSX Composite Index is again overbought and vulnerable to a short-term correction, according to Relative Strength Index (RSI).

The benchmark’s RSI reading as of Thursday’s close is 73.6, above the sell signal of 70. The index gained 0.9 per cent for the week and stands 2.1 per cent higher for 2018.

There are only three oversold, technically attractive index members this week trading with RSI levels below the buy signal of 30. Chorus Aviation Inc. is the most oversold stock in the benchmark, followed by Prometic Life Sciences Inc. and WestJet Airlines Ltd.

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I picked an overbought stock – Canadian Apartment Properties REIT – as the focus chart this week. The trust’s unit price jumped 5.1 per cent for the week ending with Thursday’s close, and it’s now the second most technically extended benchmark stock (behind Valeant Pharmaceuticals International Inc.).

The supportive influence of the 200-day moving average trend line is the most obvious trend on the chart. In July 2017 and through the February-March 2018 period, price declines halted right at the trend line before new rallies began.

RSI sell signals were broadly effective in warning investors of temporary declines in the price. In April 2017, a sell signal was followed by 6.9-per-cent decline by the end of July. A November 2017 sell signal kicked off a sideways move for the price and eventually a 5.4 per cent decline by early February of this year.

More recently, two RSI sell signals in May predicted marginal price declines before the strong rally resumed. Based on 2018 patterns, there does not appear to be risk of anything except a small decline in the near term, but potential investors would be well served to wait until the RSI reading falls below 70.

There are 30 overbought, technically vulnerable S&P/TSX Composite companies according to RSI this week. Valeant and the Canadian Apartment REIT lead the way as mentioned, followed by Canada Goose Holdings Inc., Brookfield Asset Management, Hudson’s Bay Co., Firstservice Corp., TFI Internetional Inc., WSP Global Inc., Morneau Shepell Inc., Shaw Communications B and Kirkland Lake Gold Ltd.

RSIPrice 200DMAReturn 1W %Return YTD %PE Ratio TTMPE Ratio Fwd
CHR-TCHORUS AVIATION INC26.396666.898.66395-5.616438-26.864885.6499212516.741682975
PLI-TPROMETIC LIFE SCIENCES INC28.027850.611.28425-18.66667-53.07692#N/A N/A#N/A N/A
WJA-TWESTJET AIRLINES LTD29.7897919.0624.66745-3.281521-26.748698.34821768912.30471272
RSIPrice 200DMAReturn 1W %Return YTD %PE Ratio TTMPE Ratio Fwd
VRX-TVALEANT PHARMACEUTICALS INTE86.2202935.0722.316958.34105733.85496#N/A N/A8.144570668
CAR.UN-TCAN APARTMENT PROP REAL ESTA77.6220642.5336.504655.14215115.6175329.55469132#N/A N/A
GOOS-TCANADA GOOSE HOLDINGS INC77.5189159.9938.614358.1095751.0702669.5286351367.17805151
BAM.A-TBROOKFIELD ASSET MANAGE-CL A77.3902755.0351.787954.4410711.32176516.81685742#N/A N/A
HBC-THUDSON'S BAY CO76.8139511.6410.66487.5785583.341303#N/A N/A#N/A N/A
FSV-TFIRSTSERVICE CORP76.2948297.1487.91913.80423210.6786146.2214243228.50237335
TFII-TTFI INTERNATIONAL INC76.2871741.2533.2363.66926426.3414622.3776269315.70232204
WSP-TWSP GLOBAL INC76.1405373.8359.3102-0.0812017824.0357730.5322241821.80448907
MSI-TMORNEAU SHEPELL INC75.9796127.1623.15910.147492623.4166532.6000715927.91366906
SJR.B-TSHAW COMMUNICATIONS INC-B75.9214827.6627.069553.154032-1.3875820.7644405921.0022779
KL-TKIRKLAND LAKE GOLD LTD74.192526.719.385910.3305838.6992321.7736180318.13496222
NTR-TNUTRIEN LTD74.0843770.31#N/A N/A3.124083#N/A N/A#N/A N/A21.06135613
RBA-TRITCHIE BROS AUCTIONEERS73.9517246.3239.176751.20166124.3421237.2623608730.26980478
TRI-TTHOMSON REUTERS CORP73.8540653.7353.787852.773527-0.208471527.7570078953.96873549
SHOP-TSHOPIFY INC - CLASS A73.60478220.21154.45275.26290673.24364#N/A N/A944.8088513
TSX-IS&P/TSX COMPOSITE INDEX73.5603916328.9615772.810.92805832.07494217.9373396315.85328219
FR-TFIRST MAJESTIC SILVER CORP73.1289410.428.477457.31204922.87736#N/A N/A49.76428769
AEM-TAGNICO EAGLE MINES LTD73.0586260.9656.364856.1281345.59175747.3823665178.85950642
ENGH-TENGHOUSE SYSTEMS LTD72.2186973.9560.88016.32638420.8888338.3452665832.86666667
BBD.B-TBOMBARDIER INC-B71.924294.893.35815-0.609756161.38614204.919318737.89334694
EFN-TELEMENT FLEET MANAGEMENT COR71.846886.577.41863.139717-29.5486316.324401319.253521127
QBR.B-TQUEBECOR INC -CL B71.7632726.3424.14534.56530411.5082417.4237636914.80607083
TCL.A-TTRANSCONTINENTAL INC-CL A71.7022931.5826.69227.41496629.210358.80604720711.39249639
TOY-TSPIN MASTER CORP-SUB VTG SHR71.6505554.6550.7874510.22591.16623524.5459541922.58004702
YRI-TYAMANA GOLD INC71.530644.133.648659.2592595.551737#N/A N/A22.56225217
GC-TGREAT CANADIAN GAMING CORP71.227255.1335.722450.804534763.1547833.61103809#N/A N/A
BCB-TCOTT CORPORATION71.0215621.5319.927354.2110363.41129362.0818312546.97988867
AGI-TALAMOS GOLD INC-CLASS A71.017567.787.69511.56658-4.83982635.7848217730.45264814
X-TTMX GROUP LTD70.9264584.9473.52733.1075522.2449818.2748535415.66869581
GIB.A-TCGI GROUP INC - CLASS A70.8076381.470.82541.01762219.1800920.2780083818.63979849
STN-TSTANTEC INC70.7285534.0134.143052.224226-2.84772624.7046291717.1421371
CSU-TCONSTELLATION SOFTWARE INC70.250661049.99816.08882.00930538.163558.5335319727.76489478

Source: Scott Barlow/Bloomberg

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