Canada Market Round-Up

The benchmark S&P/TSX Composite Index (TSX: ^TSX) started the last week on a negative note and maintained a bearish momentum for the entire week. The S&P/TSX composite index dropped by 256.78 points (1.38%) to 18326.35 for the week ending October 14, 2022. On October 17, 2022, the index closed at 18621.02, up by 294.67 points or ~1.61%. Healthcare, Industrials, Utilities, Technology, Consumer Cyclicals, Financials, Real Estate, Basic Materials, Consumer Non-Cyclicals and Energy were the leading sectors on Monday. As per the data published by Statistics Canada, Canadian wholesale sales numbers grew 1.4% in August and reached a new high of $81.3 billion. The weekly chart indicates that the index prices are trading above the falling trendline support level. However, prices are sustaining below the 21- period & 50-period SMA, which may act as a resistance level for the index. The immediate resistance for the index is around 19150, while the immediate support exists at 18047. On the weekly time frame, RSI is reading at ~40.32 levels.

On the macro front, the upcoming major economic events that may impact the Canadian market sentiment include House Starts, Annualized, CPI BoC Core MM and Retail Sales MM.

Global Markets Wrap-Up

For the week ending October 14, 2022, S&P 500 closed at 3583.07, down by ~0.81%. The Nasdaq composite was also down by ~3.11% and settled at 10321.39, and Russell 2000 ended the week at 1682.40, reflecting a decrease of ~1.16%. According to the weekly data published by the U.S. Department of Labor, the seasonally adjusted initial US initial jobless claims increased by 9,000 to 228,000 for the week ending October 08, 2022, against the initial claims at 219,000 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 Denison Mines Corp. (TSX: DML) and Ensign Energy Services Inc. (TSX: ESI) for the next 2-4 weeks.

Denison Mines Corp.

Denison Mines Corp (TSX: DML) is a uranium exploration and development company with interests focused on the Athabasca Basin region of northern Saskatchewan, Canada.

Price Action Analysis (on the Weekly Chart)

On the weekly chart, DML stock prices are sustaining above the upward sloping trendline and continuously taking support from the trendline. The recent upside movement in the stock is backed by increasing volumes, further supporting a positive bias. The next resistance level is placed around CAD 1.91, 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 a reading of ~52.43 levels, indicating positive momentum. Moreover, the volume in the stock is showing an upward trend, which indicates higher participation from the individuals. Further, the stock is trading above the 21-period SMA, which may act as a support level.

General Recommendation:

As per the above-mentioned price action and technical analysis, Denison Mines Corp. is looking technically well-placed on the chart, and a ‘Speculative Buy’ recommendation has been given on the stock. Investment decisions should be made depending on an individual’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.

Ensign Energy Services Inc.

Ensign Energy Services Inc. (TSX: ESI) is a Canada-based company which offers oilfield services including drilling and well servicing, oil sands coring, directional drilling, underbalanced and managed pressure drilling, equipment rentals and transportation. The company provide these services in Canada, the United States and internationally.

Price Action Analysis (on the weekly chart)

On the weekly chart, ESI stock price witnessed a breakout of the falling trendline at CAD 2.71 level on October 17, 2022. In addition, prices are also trading above the rising trendline, which is now acting as a support zone. The next resistance level is plotted around CAD 3.18, 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 ~47.34 levels, recovering from the lower levels. Moreover, the weekly volumes also seem supportive of the upside movement. However, the stock is trading below 21-period & 50- period SMA, which may act as a resistance 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 decisions should be made depending on an individual’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 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.

Related Risks: This report may be looked at from high-risk perspective and recommendations are provided are for a short duration. 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, social and political instability risks etc.

Note 1: Individuals can consider exiting from the stock if the Target Price or Stop loss mentioned as per the technical analysis has been achieved and subject to the factors discussed above.

Note 2: 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. 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 a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock.

Resistance: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Resistance 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Resistance 2 may act as the crucial resistance level for the stock.

Stop-loss: It is a level to protect further losses in case of 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.  This report is based on ~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.  Individuals can Trail the Stop-Loss as per the aforementioned levels if the stock price achieves more than 50% of the Target 1. individuals 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, currency, technical indicators, support, and resistance levels is October 17, 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 individuals. Technical reports in general chart out metrics that may be assessed by individuals 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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