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

TGAM_INVEST - Fri Dec 7, 10:19AM CST

The S&P/TSX Composite dropped a painful 1.6 per cent for the trading week ending with Thursday’s close and now sits 5.3 per cent lower for the year.

Technically, the benchmark is in neutral territory by Relative Strength index (RSI) with a reading of 41 that is between the buy signal of 30 and the RSI overbought sell signal of 70.

There are 25 oversold, technically attractive index stocks trading below the RSI buy signal this week. Energy companies dominate the list, but major banks – Canadian Western Bank, Canadian Imperial Bank of Commerce and Bank of Montreal - are also on the list.

NuVista Energy Ltd. is the most oversold company in the benchmark, followed by Richelieu Hardware Ltd., Boardwalk REIT, Lucara Diamond Corp., and Whitecap Resources Inc.

I picked Bank of Montreal for the focus chart this week for its prominence in the Canadian market. The good news is that RSI buy signals have generally worked well in uncovering profitable entry points for the stock over the past three years. The bad news is that buy signals have not worked at all more recently.

A buy signal in January of 2016 successfully forecast a 46-per-cent rally (not including dividends) to March of 2017. A May 2017 buy signal predicted a weaker rally before further price weakness, but another RSI buy signal in September 2017 was followed by an 18-per-cent appreciation by late January 2018.

More recently, BMO’s price stopped falling after a buy signal in October 2018 but failed to rally. The stock went sideways before getting caught up in the December sell-off that also hit U.S. bank stocks.

I don’t fully trust the current buy signal, but I’m taking it seriously at the same time. The longer-term history, combined with a positive fundamental outlook (as always, fundamental research needs to be part of every market transaction), might make BMO an interesting candidate for further study here.

There are 11 overbought, technically vulnerable S&P/TSX Composite constituents by RSI this week, led by Hydro One Ltd. The list is primarily made up of defensive market sectors, as highlighted by Loblaw Companies Ltd., Emera Inc., Metro Inc., BCE Inc. and Telus Corp.

RSIPrice200DMAReturn 1W %Return YTD %PE Ratio TTMPE Ratio Fwd
NVA-TNUVISTA ENERGY LTD22.565763.667.56255-13.71571-56.857866.1955352978.261851016
RCH-TRICHELIEU HARDWARE LTD23.4950122.9928.57235-11.36802-32.3496819.26147836#N/A N/A
BEI-UN-TBOARDWALK REAL ESTATE INVEST23.9831740.8246.70725-2.554309-3.37249.896441256#N/A N/A
LUC-TLUCARA DIAMOND CORP25.332221.682.1159-10.90425-38.2394941.398374549.740768218
WCP-TWHITECAP RESOURCES INC25.667384.587.9916-7.82241-49.4106612.4783397917.41444867
CMG-TCOMPUTER MODELLING GROUP LTD25.797536.058.9743-6.327641-34.0552624.5319673521.45390071
RUS-TRUSSEL METALS INC26.1216822.3627.64815-5.670996-21.121136.8651229387.631399317
VII-TSEVEN GENERATIONS ENERGY - A26.17449.7515.03785-7.360157-46.906646.2030279687.111597374
CWB-TCANADIAN WESTERN BANK26.6246126.8234.26805-7.45751-30.541959.0746280558.396994364
BMO-TBANK OF MONTREAL26.8484694.04101.1999-5.495169-3.07385310.633262689.796853839
SES-TSECURE ENERGY SERVICES INC27.143717.147.9577-5.21262-18.62428364.732318540.11235955
PSK-TPRAIRIESKY ROYALTY LTD27.5577617.2824.7987-5.022573-45.9718636.0862324957.21854305
ALA-TALTAGAS LTD27.6250513.9723.32325-2.285714-47.99098#N/A N/A19.03269755
CM-TCAN IMPERIAL BK OF COMMERCE27.91727108.55116.2999-4.019207-8.839999.002994348.619868181
NFI-TNFI GROUP INC27.9360835.2950.8447-5.184393-32.93099.9079306999.779351005
ECA-TENCANA CORP27.960248.9115.2337-6.918919-48.4646810.65356926.973947873
LB-TLAURENTIAN BANK OF CANADA28.3162139.6745.7108-6.861107-28.098387.3071445477.674598568
ONEX-TONEX CORPORATION28.432178.591.82275-4.833395-15.12369#N/A N/A169.0553396
PEY-TPEYTO EXPLORATION & DEV CORP28.523469.5710.8686-9.720885-33.712159.94515066817.62430939
AAV-TADVANTAGE OIL & GAS LTD28.85162.343.7254-10.9375-57.77778#N/A N/A19.02439024
KEL-TKELT EXPLORATION LTD28.966134.357.67815-7.572381-42.28094#N/A N/A241.6666667
TVE-TTAMARACK VALLEY ENERGY LTD29.007232.243.85675-10-27.6223823.0256058120
PD-TPRECISION DRILLING CORP29.310172.934.20185-8.766233-26.24672#N/A N/A#N/A N/A
POU-TPARAMOUNT RESOURCES LTD -A29.48297.1514.0175-5.608755-64.46962#N/A N/A#N/A N/A
ARX-TARC RESOURCES LTD29.954139.1313.3492-2.404372-36.8702616.8985515315.66037736
RSIPrice200DMAReturn 1W %Return YTD %PE Ratio TTMPE Ratio Fwd
H-THYDRO ONE LTD83.617121.3519.85949.511699-0.560539616.679687816.11320755
KL-TKIRKLAND LAKE GOLD LTD76.7362130.0424.768111.1439156.8301720.293946417.14053569
L-TLOBLAW COMPANIES LTD76.4184661.8454.046341.14136414.652719.634382713.86547085
EMA-TEMERA INC76.135945.3741.223951.1830361.84613834.166008216.67401691
MRU-TMETRO INC75.4961246.34542.16030.262008716.1374219.1165277916.10879388
GIL-TGILDAN ACTIVEWEAR INC73.4277444.2738.3384.10256411.6436519.1717486516.26938519
CUF-UN-TCOMINAR REAL ESTATE INV-TR U73.0237411.9212.2334512.62959-12.0330510.32053403#N/A N/A
SRU-UN-TSMARTCENTRES REAL ESTATE INV72.8537632.1530.077252.8434519.8823217.31065245#N/A N/A
BCE-TBCE INC72.8168357.2654.23260.6127451-0.783578916.9705615315.58943643
T-TTELUS CORP71.8948848.1146.50690.8620694.1108518.9849543415.88312975
TRI-TTHOMSON REUTERS CORP70.3651468.2955.513682.60463728.3439960.0869250257.57671381

Source: Bloomberg/Scott Barlow

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