The S&P/TSX Composite dropped 0.8 per cent for the trading week ending with Thursday’s close, and the benchmark stands 1.3 per cent higher for 2018.
According to Relative Strength Index (RSI), the index is in technically neutral range with a reading of 50 that is exactly half way between the oversold buy signal of 30 and the RSI overbought sell signal of 70.
There are 16 benchmark constituents trading below the RSI buy signal that indicates a higher probability of a stock price bounce. Linamar Corp. is the most oversold company followed by Corus Entertainment Inc., Power Financial Corp., WestJet Airlines Ltd. and CI Financial. Check the table below for full list of oversold stocks.
I picked Blackberry Inc. for the focus chart after the stock cratered 17 per cent this week.
RSI buy signals have been rare for Blackberry in the past 24 months, but they’ve worked extremely well. A buy signal at year end 2016 marked a sideways move in the price before it began a ramp higher by 71 per cent three months later.
A series of buy signals in August 2017 began a similar price movement, marking the beginning of trading in a narrow range until mid-September, when a 66-per-cent rally to a January 2018 peak followed. An April RSI buy signal led to a 21-per-cent rally until last week’s unpleasant plunge.
The current price is well below the 200-day moving average trend line, but, besides that, the recent history of success for RSI buy signals makes the current signal a potentially profitable entry point. This depends, of course, on fundamental factors and fundamental research should be complete before any market transactions.
The list of overbought, technically vulnerable S&P/TSX stocks is smaller this week, as we’d expect after weaker markets. Firstservice Corp. is the most overbought company in the index, followed by Spin Master Corp., Oceangold Corp., Emera Inc., Canadian Utilities Ltd. and Enghouse Systems Ltd.
