S&P/TSX Composite Index Market Round-Up

Last week, the benchmark S&P/TSX Composite Index (TSX: ^TSX) started on a positive note, but the market faced selling pressure from higher levels, and the index made a low of 17950.75 (on March 04, 2021). The S&P/TSX composite index closed 320.70 points up or +1.78% to 18380.96 for the week ending March 05, 2021. On the weekly chart, the index recorded a breakout of the horizontal trendline at 18020.48 level and bounced from the key support level of 18000. During yesterday’s trading session, the index recorded an all-time high of 18595.72 level as the US senate approve the stimulus bill. Real Estate, Consumer Cyclicals and Financials were the top leading sectors, while Technology and Basic materials were the only lagging sectors on Monday. The index price is sustaining above the upward sloping trend line, and based on the weekly chart, the immediate resistance level for the index is at 18810, while the immediate support exists at 18000. On the weekly time frame, RSI is trading at ~64.14 levels, which support bullish bias for the index.

The index price may test the upside resistance of 18810 levels in the coming trading sessions, considering the strong bullish momentum. In the coming week, the Canadian market may witness volatility due to the upcoming data such as BoC rate decision, Employment data and Manufacturing Sales data.      

Global Markets Wrap-Up 

For the week ending March 05, 2021, S&P 500 gained from lower levels and settled at 3841.94 with a marginal rise of ~0.81%, Dow Jones Industrial Average settled at 30932.37 with an overall gain of ~1.82 %, the Nasdaq composite was down 272.19 points to close at 12920.148, a decline of ~2.06% while Russell 2000 settled at 2192.21 with an overall weekly loss of ~0.40%.

The indices reacted to the data released by the US Bureau of Labor Statistics last week.  The US claims for jobless benefits were 745,000 last week, compared with 736,000 in the prior week. Also, the US Bureau of Labor Statistics released the jobs data for the non-farm payrolls rose by 379,000 in February 2021 compared to 166,000 in January 2021.

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 take a 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 George Weston Limited (TSX: WN) and American Hotel Income Properties REIT LP (TSX: HOT.UN) for the next 2-4 weeks duration.

George Weston Limited

George Weston Limited (TSX: WN) is a Canada-based company engaged in the business of food processing and distribution. The Company operates through three business segments: Weston Foods, Loblaw, and Choice Properties.

Price Action Analysis (on the Weekly Chart)

On the weekly chart, WN stock price has broken out of its falling wedge pattern at CAD 99.35 level on March 4, 2021 Post that, the price touched the 7-month high of CAD 101.62 on March 8, 2021. The price chart suggests that after the breakout, prices took the support of the upper band of the pattern, and since then, prices are sustaining above the support level. In addition, the stock price has taken the support of its rising trend line, which indicates bullish momentum in the stock. The next important resistance level appears to be at CAD 115 and prices 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 ~57.34 levels, which supports a bullish stance for the stock. Moreover, the volume in stock is showing an upward trend, which indicates higher participation from the investors. Furthermore, the stock prices are placed well above both the 21-period SMA and 50-period SMA, which is indicating a positive trend for the prices.

Financial Summary:

General Recommendation:

As per the above-mentioned price action and technical indicators analysis, we can conclude that George Weston 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.

American Hotel Income Properties REIT LP 

American Hotel Income Properties REIT LP (TSX: HOT.UN) is a Canada-based limited company that invests in hotel properties primarily in the United States. The company operates in two segments: The Rail Hotels and Branded Hotels.

Price Action Analysis (on the Weekly Chart)

HOT.UN stock price has witnessed a breakout of its symmetrical triangle pattern at CAD 3.58 level on the weekly chart that indicates bullish sentiments for the stock. After consolidation of more than one year, the price registered a decisive breakout that suggests a change in trend from sideways to bullish. The chart suggests that the stock prices are sustaining above the breakout of the triangle pattern. Now, the next resistance level appears to be at CAD 4.40, and the stock, in the short term (2-4 weeks), may test that level.

Technical Indicators Analysis (On the Weekly Chart)

On the weekly chart, the momentum oscillator RSI (14-Period) is trading at ~61.14 levels, indicating a bullish momentum in the prices. Moreover, the stock is trading above the simple moving averages “SMA 21, SMA 50” 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 the upside movement.

Financial Summary:

General Recommendation:

As per the above-mentioned price action and technical indicators analysis, we can conclude that American Hotel Income Properties REIT LP 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 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.

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 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 08, 2021. 

Abbreviations

CMP: Current Market Price

SMA: Simple Moving Average

CAD: Canadian DollarGN

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.

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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.