Canada Market Round-Up

Last week, the benchmark S&P/TSX Composite Index (TSX: ^TSX) started on a positive note and maintained a bullish momentum for the entire week. The S&P/TSX composite index added 470.36 points (2.56%) to 18851.32 for the week ending March 12, 2021. The benchmark index ended in the green for the second straight week on March 12, 2021, due to the jobs report data published by Statistics Canada. The employment number increased by 2,59,200 in February, and the unemployment rate fell to 8.2% in the same period. The index hit an all-time high of 18964.29 on March 15, 2021 (Monday). Healthcare, Technology and Basic Materials were the leading sectors, while Academic and Educational Services, Financials and Consumer Non-Cyclicals were the only laggards on Monday. The weekly chart reflects that the index is sustaining above the upward sloping trend line and the immediate resistance level for the index is at 19310, while the immediate support exists at 18270. On the weekly time frame, RSI is trading at ~68.21 levels, which supports the bullish stance for the index.

The upcoming major events that may impact the Canadian market sentiment include CPI BoC Core YY and Retail Sales monthly.       

Global Markets Wrap-Up 

For the week ending March 12, 2021, S&P 500 made a new lifetime high and closed at 3943.34, up by ~2.64%. Dow Jones Industrial Average also crossed the 32000 mark and settled at 32778.64 with an overall gain of ~4.07 %, the Nasdaq composite advanced almost 400 points and closed at 13319.86 (up ~3.09%) while Russell 2000 settled at 2352.79, reflecting an increase of ~7.32%. The major global indices reacted positively to the data released by the Department of Labor last week. The US claims for jobless benefits were 712,000 last week, compared with 754,000 in the prior week. Also, the US President signed the USD 1.9 trillion stimulus bill last week, which also lifted the market sentiments.

Having understood the US market performance over the past one week, taking cues from major global news, and based on our technical analysis of the S&P/TSX Composite Index, now let us look at the two TSX- listed stocks from the technical standpoint. Noted below are our recommendations based on generic insights, entry price, target prices, and stop-loss for ARC Resources Ltd. (TSX: ARX) and Extendicare Inc. (TSX: EXE) for the next 2-4 weeks duration.

ARC Resources Limited 

ARC Resources Limited (TSX: ARX) is a Canada-based company engaged in the business of oil and gas. The Company focused on the exploration, development and production of conventional crude oil, natural gas liquids (NGLs) and natural gas in western Canada.

Price Action Analysis (on the Weekly Chart)

On the weekly chart, ARX stock price broke out of an ascending triangle pattern at CAD 7.45 level on February 9, 2021. Post that, the price touched the 52-week high of CAD 8.67 on March 11, 2021 and since then, prices are sustaining above the support level. The next important resistance level appears to be at CAD 9.40 and stock may test that level within the 2-4 weeks duration.

Technical Indicators Analysis (On the Weekly Chart)

On the weekly chart, the momentum oscillator RSI (14-Period) is trading at ~59.68 level, which supports the bullishness in the stock price. Moreover, the volume in the stock is showing an upward trend, which indicates higher participation from the investors. Moreover, the stock prices are trading above 21-period and 50-period SMA, indicating a positive trend.

Financial Summary:

General Recommendation:

As per the above-mentioned price action and technical indicators analysis, we can conclude that ARC Resources Limited is looking technically well-placed on the chart and we recommend a ‘Buy’ rating on the stock. Investment decision should be made depending on an investor’s appetite for upside potential, risks, and any previous holdings. This recommendation is purely based on technical indicator analysis, and fundamental analysis has not been considered in this report. Below is the summary of our recommendation.

Extendicare Inc. 

Extendicare Inc. (TSX: EXE) is a Canada-based health services company. The company engaged in the business of nursing care, home health care, retirement living and management and consulting services. The company operates through the following business segments: Long-Term Care, Retirement Living, Home Health Care, and Other Operations.

Price Action Analysis (on the Weekly Chart)

On the weekly chart, EXE stock price witnessed a breakout of the horizontal channel pattern at CAD 6.83 level (on March 1, 2021) that indicates positive sentiments for the stock. After a consolidation of more than one year in the range of CAD 5.01 to CAD 6.83, the price registered a decisive breakout that suggests a change in trend from sideways to bullish. Now, the next resistance level appears to be at CAD 8.50, and the stock may test that level in the short term (2-4 weeks).

Technical Indicators Analysis (On the Weekly Chart)

On the weekly chart, the momentum oscillator RSI (14-Period) is trading at ~66.78 levels, indicating a bullish momentum. Moreover, the stock is trading above 21-period and 50-period SMA and recorded a golden crossover on the weekly chart, which should act as a crucial support level for the prices. The weekly volumes also look supportive for an upside movement.

Financial Summary:

General Recommendation:

As per the above-mentioned price action and technical indicators analysis, we can conclude that Extendicare Inc. is looking technically well-placed on the chart and we recommend a ‘Speculative Buy’ rating on the stock. Investment decision should be made depending on the investor’s appetite for upside potential, risks, and any previous holdings. This recommendation is purely based on technical indicator analysis, and fundamental analysis has not been considered in this report. Below is the summary of our recommendation.

Upcoming Major Global Economic Events

Market events occur on a day-to-day basis depending on the frequency of the data and generally include update on employment, inflation, GDP, consumer sentiments, etc. Noted below are the upcoming week's major global economic events that could impact the S&P/TSX Composite Index and listed stocks’ prices.

Investment Related Risks: Based on the technical analysis, the risks are defined as per risk-reward ratio (~0.60:1.00); however, returns are generated within 2-4 weeks’ time frame. This may be looked at by Investors with sufficient risk appetite looking for returns within short investment duration. Investment recommendations provided in this report are solely based on technical parameters, and the fundamental performance of the stocks has not been considered in the decision-making process. Other factors which could impact the stock prices include market risks, regulatory risks, interest rates risks, currency risks, and social and political instability risks etc.

Entry Price: For the given recommendation(s), Entry Price is assumed be at or above a certain level. However, a slight deviation on either side in the ‘Entry Price’ can be considered depending upon the potential expected or indicated.

Note: How to Read the Charts?

The Green color line reflects the 21-period moving average while the red color line indicates the 50-period moving average. SMA helps to identify existing price trend. If the prices are trading above the 21-period and 50-period moving average, then it shows prices are currently trading in a bullish trend.

The Black color line in the chart’s lower segment reflects the Relative Strength Index (14-Period), which indicates price momentum and signals momentum in trend. A reading of 70 or above suggests overbought status while a reading of 30 or below suggests an oversold status.

The Blue color bars in the chart’s lower segment show the volume of the stock. The volume is the number of shares that changed hands during a given day. Stocks with high volumes are more liquid than the stocks with lesser volume and we consider stocks with greater than or equal to 200,000 volumes as more liquid. Liquidity in stocks helps in easier and faster execution of the order.

The Orange color lines are the trend lines drawn by connecting two or more price points and used for trend identification purposes. The trend line also acts as a line of support and resistance.

Risk Reward Ratio: Risk reward ratio is the difference between an entry point to a stop loss and profit level. We suggest ~60% Stop Loss of the Target 1 from the entry point.

A trailing stop-loss is a modification of stop-loss in case of favourable movement in the price to protect the gains. We suggest Investors to Trail the Stop-Loss as per the aforementioned levels, if the stock price achieves more than 50% of the Target 1. Investors should consider exiting from the position as per the Trailing Stop-Loss level if the price starts moving downwards after achieving more than 50% of the Target 1.

The reference date for all price data, volumes, technical indicators, support, and resistance levels is March 15, 2021. 

Abbreviations

CMP: Current Market Price

SMA: Simple Moving Average

CAD: Canadian Dollar

RSI: Relative Strength Index 

Note: Trading decisions require a thorough analysis by investors. Technical reports in general chart out metrics that may be assessed by investors before any stock evaluation. The above are illustrative analytical factors used for evaluating the stocks; other parameters can be looked at along with additional risks per se. Past performance is neither an indicator nor a guarantee of future performance.

Disclaimer

The advice given by Kalkine Canada Advisory Services Inc. and provided on this website is general information only and it does not take into account your investment objectives, financial situation and the particular needs of any particular person. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. The website www.kalkine.ca is published by Kalkine Canada Advisory Services Inc. The link to our Terms & Conditions has been provided please go through them. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations later.