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 advanced by 237.74 points (1.27%) to 18990.32 for the week ending April 02, 2021 after taking cues from the IHS Markit Canada Manufacturing Purchasing Managers' index (PMI) that rose to 58.5 in March from 54.8 in February. On Monday, the index closed at 19026.79, up 36.47 points or ~0.19%. During the trading session, the index made a new lifetime high of 19082.65. Basic Materials, Financials, Utilities, and Academic & Educational Services were the leading sectors, while Energy, Healthcare, Technology, and Real Estate were the laggards on Monday. The index price is trending upward, forming a series of higher tops and higher bottoms, which indicates bulls are still in action. The weekly chart reflects that the index is sustaining above the upward sloping trendline and the immediate resistance level for the index is at 19310, while the immediate support exists at 18400. On the weekly time frame, RSI is trading at ~68.11 levels, which supports the bullish momentum in the index.

The upcoming major economic events that may impact the Canadian market sentiment include Trade Balance, Employment Change, and Unemployment rate monthly. 

Global Markets Wrap-Up 

For the week ending April 02, 2021, S&P 500 hit a new lifetime high and closed at 4019.86, up by ~1.14%. Dow Jones Industrial Average settled at 33153.21 with an overall gain of ~0.24 %, while the Nasdaq composite added almost 341.38 points and closed at 13480.10 (rose ~2.60%). Russell 2000 settled at 2253.90, reflecting an increase  of ~1.46%. The major global indices reacted positively to the total nonfarm payroll employment that rose by 916,000 in March, and the unemployment rate that trimmed down to 6.0 percent, as per the data published by the U.S. Bureau of Labor Statistics.

Having understood the US market’s 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 Saputo Inc. (TSX: SAP) and NFI Group Inc. (TSX: NFI) for the next 2-4 weeks duration.

Saputo Inc.

Saputo Inc. (TSX: SAP) is engaged in the production, marketing, and distribution of a wide range of dairy products. The Company has a presence across the world and sells its product in over 50 countries.

Price Action Analysis (on the Weekly Chart)

On the weekly chart, SAP stock price witnessed a breakout of the ascending triangle pattern at CAD 37.85 level (on March 11, 2021) that indicates a bullish trend in the stock. The price registered a decisive breakout that indicates a change in trend from sideways to bullish. From the past few weeks, the stock price hovering around the breakout level. Now, the next resistance level appears to be at CAD 44, 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 ~58.64 level, which supports the upside move in the stock price. The volume in the stock is showing an upward trend, which indicates higher participation from the investors. Furthermore, the stock is 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 analysis, we can conclude that Saputo 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 the investor’s appetite for 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. Below is the summary of our recommendation.

NFI Group Inc.

NFI Group Inc. (TSX: NFI) is a Canada-based automobile manufacturer company. The company derives more than half of its revenue from the manufacturing segment, while rest comes from the aftermarket segment. The group manufactures transit buses for public transportation, and motor coaches.

Price Action Analysis (on the Weekly Chart)

On the weekly chart, NFI stock price broke out of the downward sloping trendline resistance at CAD 27.71 level on January 11, 2021. Since the breakout, prices are sustaining above the downward sloping trendline. The next important resistance level appears to be at CAD 33, and prices 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 ~60 levels, indicating bullish momentum. Moreover, the stock is trading above 21-period and 50-period SMA, which may 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 analysis, we can conclude that NFI Group 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 the investor’s appetite for 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. 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 April 05, 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.

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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.