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 witnessed a selling pressure because of a sudden spike in the US bond yield, and the Index made a low of 17929.99 (on February 26, 2021). The S&P/TSX composite index closed 342 points down or -1.76% to 18060.26 for the week ending February 26, 2021. The Index is trending upward, forming a series of higher tops and higher bottoms, which indicates that bulls are still in action. On the weekly chart, the Index recorded a breakout of the horizontal trendline at 18020.48 level and managed to hold the key support level of 18000. During the Monday trading session, Academic & Educational Services was the top gainer among all the sectors. The Healthcare, Consumer Cyclicals, Industrials, Energy and Financials were the top gaining sectors, while Basic materials was the only losing sector. In addition, the Index is well placed above the 21-period SMA, which is acting as important support. Based on the weekly chart, the immediate resistance level for the Index is at 18810, while the immediate support is at 18000 levels. On the weekly time frame, RSI is trading at ~62.70 levels, further providing strength to the prices.

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 market may witness volatility due to the upcoming data such as Canadian GDP numbers, Building permits and Trade balance data.    

Global Markets Wrap-Up 

The US market witnessed a sharp weekly declined during the last week. S&P 500 dropped from higher levels and settled at 3811.15 with an overall decline of 2.45%, Dow Jones Industrial Average settled at 30932.37 with an overall loss of ~1.78 %, the Nasdaq composite was down 682.11 points at 13192.34, while Russell 2000 settled at 2201.05 with an overall weekly loss of ~2.90% for the week ending February 26, 2021.

The Major global indices faced selling pressure from higher levels last week after taking cues from a steep rise in the benchmark 10-Year US Treasury yield that jumps to one year high. US jobless claims data released by the Labor department of the US. The US claims for jobless benefits were 730,000 last week, compared with 841,000 in the prior week. Meanwhile, the US House Democrats passed the USD 1.9 trillion Biden stimulus plan on February 27, 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 for the upcoming week, now let us take a look at the two TSX listed stock picks from the technical standpoint. Noted below are our recommendations based on generic insights, entry price, target prices, and stop-loss for CI Financial Corp (TSX: CIX) and Transcontinental Inc (TSX: TCL.A) for the next 2-4 weeks duration.

CI Financial Corp. 

CI Financial Corp. (TSX: CIX) is a Canada-based asset and wealth management company. The Company operates through two business segments: Asset Management and Wealth Management.

Price Action Analysis (on the Weekly Chart)

On the weekly chart, CIX stock price has broken out of its falling wedge pattern at CAD 17.20 level, indicating positive momentum in the price. 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. The stock price is trending upward in the last couple of weeks, forming a series of higher tops and higher bottoms, which indicates bullish momentum. The next important resistance level appears to be at CAD 20.70, and prices may test the level in the 2-4 weeks duration. Any further breakout above the CAD 20.70 accompanied by volume may extend the rally in the stock.

Technical Indicators Analysis (On the Weekly Chart)

On the weekly chart, the momentum oscillator RSI (14-Period) is trading at ~53.79 levels, which supports a bullish stance for the stock. The weekly volumes also look supportive of the upside movement. Moreover, the stock is trading above the simple moving averages “SMA 21, SMA 50” and has given a golden crossover on the weekly chart, which should act as a crucial support level for the prices.

Financial Summary:

General Recommendation:

As per the above-mentioned price action and technical indicators analysis, we can conclude that CI Financial Corp. 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.  

Summary of our recommendation is as follows:

Transcontinental Inc. Class A  

Transcontinental Inc. Class A  (TSX: TCL.A) is a printing company which operates in both Canada and the United states. The company operates in various business segments like the Packaging Sector, the Printing Sector, and the Media Sector. It also converts plastics from various sources into recycled plastic granules. 

 

Price Action Analysis (on the Weekly Chart)

TCL.A stock price has witnessed a breakout of its bullish pennant pattern at CAD 21.53 level on the weekly chart that indicates bullish sentiments for the price. After consolidating in the range of CAD 22.50 – CAD 20.07 for more than 3 months, 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 bullish pennant pattern. The stock has been trading in higher high, and higher bottom formation for the last few months, which suggest positive momentum for the prices. On the weekly chart, the stock price is taking support at its upward sloping trendline at CAD 20. Now, the next resistance level appears to be at CAD 25.50, 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 ~65.16 levels, indicating a bullish momentum in the prices. Moreover, 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. Furthermore, the stock volumes are showing an upward trend, indicates higher participation from the investors.  

Financial Summary:

General Recommendation:

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

The summary of our recommendation is as follows:

 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 01, 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.