Canada Market Round-Up

The benchmark S&P/TSX Composite Index (TSX: ^TSX) started the last week on a positive note and managed to end on a bullish note. The S&P/TSX composite index gained by 132.43 points (0.70%) to 19062.91 for the week ending June 24, 2022. On Monday, the index closed at 19258.32, up by 195.41 points or ~1.02%. Energy, Basic Materials, Consumer Cyclicals, Financials, and Utilities were the leading sectors, while Technology, Real Estate, Healthcare, and Utilities were the laggards on Monday. As per the data published by Statistics Canada in April, Canadians received regular Employment Insurance (EI) benefits, bringing the total number of beneficiaries to 496,000. The weekly chart indicates that the index prices are sustaining below the horizontal trendline support. Moreover, prices are trading below the 21- period & 50-period SMA, indicating negative momentum for the index. The immediate resistance for the index is around 19896, while the immediate support exists at 18660. On the weekly time frame, RSI is reading at ~35.10 levels.

On the macro front, the upcoming major economic events that may impact the Canadian market sentiment include GDP MM, and S&P Global Mfg PMI SA.

Global Markets Wrap-Up 

For the week ending June 24, 2022, S&P 500 closed at 3911.74, up by ~6.45%. The Nasdaq composite was also up by ~7.49% and settled at 11607.62, and Russell 2000 ended the week at 1765.74, reflecting an increase of ~6.0%. According to the weekly data published by the U.S. Department of Labor, the seasonally adjusted initial US initial jobless claims decreased by 2,000 to 229,000 for the week ending June 18, 2022, against the initial claims at 231,000 in the prior week.

Taking into the US market's performance over the last week, following the major global macros and data front, based on the technical analysis of the S&P/TSX Composite Index, the two TSX listed stocks fit the maximum criteria on the technical framework. The recommendations are based on the generic insights, entry price, target prices, and stop-loss for Nutrien Ltd. (TSX: NTR) and Ensign Energy Services Inc. (TSX: ESI) for the next 2-4 weeks.

Nutrien Ltd.

Nutrien Ltd (TSX: NTR) is the world's largest fertilizer producer by capacity. It produces three main crop nutrients--nitrogen, potash, and phosphate--although its main focus is potash, where it is the global leader in installed capacity with roughly 20% share.

Price Action Analysis (on the Weekly Chart)

On the weekly chart, NTR stock prices are sustaining above the upward sloping trendline and continuously taking support of the trendline. The recent upside movement in the stock is backed by increasing volumes, further supporting a positive bias. The next resistance level is plotted around CAD 122.50, and the stock may test that level in the short term (2-4 weeks).

Technical Analysis (On the Weekly Chart)

On the weekly chart, the momentum oscillator RSI (14-Period) is showing the reading of ~46.58, recovering from the lower levels. Moreover, the weekly volumes also seem supportive of the upside movement. Further, the stock is trading above 50- period SMA, which may act as a support level. However, the stock is trading below 21-period SMA, which may act as a resistance level.

General Recommendation:

As per the above-mentioned price action and technical analysis, Nutrien Ltd. is looking technically well-placed on the chart, and a ‘Buy’ recommendation has been given on the stock. Investment decision should be made depending on an investor’s appetite for an upside potential, risks, and any previous holdings.This recommendation is purely based on technical analysis, and fundamental analysis has not been considered in this report. Markets are trading in a highly volatile zone currently due to certain macroeconomic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing. Below is the summary of our recommendation.

Ensign Energy Services Inc.

Ensign Energy Services Inc. (TSX: ESI) is a Canada-based company which offers oilfield services include drilling and well servicing, oil sands coring, directional drilling, underbalanced and managed pressure drilling, equipment rentals and transportation.

Price Action Analysis (on the weekly chart)

On the weekly chart, the ESI stock price witnessed a breakout of the rising channel pattern. Since then, prices are continuously sustaining above the upper band of the pattern, which is now acting as a support zone. The next resistance level is placed around CAD 3.97, 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 showing a reading of ~51.50 levels, indicating positive momentum. Further, the volume in the stock is showing an upward trend, which indicates higher participation from the investors. Further, the stock is trading above 50- period SMA, which may act as a support level.

General Recommendation:

As per the above-mentioned price action and technical analysis, Ensign Energy Services Inc. is looking technically well-placed on the chart, and a ‘Speculative Buy’ recommendation has been given on the stock. Investment decision should be made depending on an investor’s appetite for an upside potential, risks, and any previous holdings. This recommendation is purely based on technical analysis, and fundamental analysis has not been considered in this report. Markets are trading in a highly volatile zone currently due to certain macroeconomic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing. 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 updates 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 a 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 that could impact the stock prices include market risks, regulatory risks, interest rates risks, currency risks, social and political instability risks, etc.

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 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.

Technical Indicators Defined: -

Support: A level at which the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level at which the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: In general, it is a level to protect further losses in case of any unfavourable movement in the stock prices..

Risk Reward Ratio: The 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 June 27, 2022. The reference data in this report has been partly sourced from REFINITIV. 

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.