The S&P/TSX Composite eased lower by 0.3 per cent for the trading week ending with Thursday’s close and sits 4.5 per cent lower for the year.
In technical terms, Relative Strength Index (RSI) is in the neutral range at 43, although closer to the oversold buy signal of 30 than the overbought RSI sell signal of 70.
There are 16 oversold attractive index members trading below the RSI buy signal of 30 this week.
Cineplex Inc. is the most oversold company in the benchmark after dropping more than 9 per cent last week. Tamarack Valley Energy Ltd. is the next most oversold stock, followed by Computer Modelling Group Ltd., Crescent Point Energy Corp., Boardwalk REIT, Guyana Goldfields Inc., Nuvista Energy Ltd. and Superior Plus Corp.
I picked Superior Plus as the focus chart this week. The stock has been trading in a relatively narrow range between $10.50 and $13.50 for the past two years, but the company’s high dividend yield – currently 6.9 per cent – should be taken in to account whenever looking at the low price volatility.
RSI buy signals have had a mixed record in uncovering profitable entry points for Superior Plus. The stock was frequently oversold by RSI during the May to July 2017 period before finally rallying 19 per cent from early August 2017 to October 27, 2017.
A November 2017 buy signal was ineffective as the price continued lower until another buy signal in February of this year. After that, the price climbed another 19 per cent to mid-May. More recently, a buy signal near the end of October was also ineffective.
RSI buy signals have not provided enough reliable entry points for Superior Plus in the past two years to trust the current one. This is also a case where fundamental research is even more important than usual – any investor considering buying Superior Plus for the dividend and riding out the current downdraft needs to be absolutely certain that the income payments stay at current levels.
There are five overbought, technically vulnerable S&P/TSX Composite constituents this week according to RSI. Loblaw Companies Ltd. is the most frothy name in the index, followed by Franco-Nevada Corp., Metro Inc., Home Capital Group Inc., Tahoe Resources Inc., and SSR Mining.
Scott Barlow