Canada Market Round-Up

Last week, the benchmark S&P/TSX Composite Index (TSX: ^TSX) started on a positive note but maintained a negative momentum for the entire week. After hitting an all-time high of 20295.18 on June 16, 2021, the S&P/TSX composite index declined by 138.76 points (-0.69%) to 19999.59 for the week ending June 18, 2021, breaking a four-week winning streak. The market reacted negatively to the consumer price index (CPI) number, which rose 3.6% on a year-over-year basis in May, according to the data published by Statistics Canada. On Monday, the index closed at 20156.36, up by 156.77 points or ~0.78%. Energy, Academics & Educational Services, Healthcare, Consumer Cyclicals and Basics Materials were the leading sectors, while Utilities and Consumer Non-Cyclicals were the laggards on Monday. The weekly chart indicates that the index prices are forming a series of higher tops and higher bottoms, which suggests bulls are still in action. The immediate resistance level for the index is 20650, while the immediate support exists at 19850. On the weekly chart, RSI is trading in the oversold territory at (~72.54 levels), which indicates the possibilities of a correction in the index. We expect volatility to remain high, whereas the index may consolidate with a positive bias in the range of 19850 to 20295 levels in the coming trading sessions.

The upcoming major economic events that may impact the Canadian market sentiment include Core Retail Sales MM, and Retail Sales MM.

Global Markets Wrap-Up 

The S&P 500 index hit a new all-time high of 4257.16 on June 15, 2021. For the week ending June 18, 2021, S&P 500 closed at 4166.45, down by ~1.91%. Moreover, Dow Jones Industrial Average settled at 33290.08 with an overall loss of ~3.45%, the Nasdaq composite fell 39.05 points and closed at 14030.38 (down ~0.28%). Russell 2000 settled at 2237.75, reflecting a decline of ~4.20%. Last week, the major global indices reacted negatively to the Fed meeting, which signalled the possible tightening of monetary policies. As per the statement, policymakers may increase the interest rate twice in 2023. Also, the US weekly unemployment claims data published by the US Labor Department increased last week to 412,000 from 375,000 the prior week, which also dented the market sentiments.

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 Turquoise Hill Resources Ltd. (TSX: TRQ) and Real Matters Inc. (TSX: REAL) for the next 2-4 weeks duration.

Turquoise Hill Resources Ltd. 

Turquoise Hill Resources Ltd. (TSX: TRQ) is a global mining company. The company engages in the business of exploration and development of mineral properties. The company primarily mines copper, gold, and coal in the Asia-Pacific region.

Price Action Analysis (on the Weekly Chart)

On the weekly chart, TRQ stock prices are trading in a rising channel pattern and sustaining above the lower band of the pattern. Moreover, stock prices are forming higher peaks and higher troughs, which indicates a bullish trend in the price. Now, the next resistance level appears to be at CAD 24, 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 ~54.78 level, which supports the further 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 bullish trend.

Financial Summary:

General Recommendation:

As per the above-mentioned price action and technical analysis, we can conclude that Turquoise Hill Resources Ltd. 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.

Real Matters Inc. 

Real Matters Inc. (TSX: REAL) is a Canada-based technology and network management company. The Company engages in the provision of management services to mortgage lending and insurance industries.

Price Action Analysis (on the Weekly Chart)

On the weekly chart, REAL stock price witnessed a breakout of the falling channel pattern at CAD 16.61 level (on June 08, 2021). The price registered a decisive breakout that suggests a change in trend from sideways to the uptrend. For the past two weeks, the stock price trading around the breakout level. In addition, prices are also trading above the rising trendline support level at CAD 15.45. Now, the next resistance level appears to be at CAD 20.55, 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 ~52.30 levels, indicating bullish momentum. Moreover, the stock is trading above 21-period, which may act as a crucial support level for the prices. The weekly volumes also seem supportive of the upside movement.

Financial Summary:

General Recommendation:

As per the above-mentioned price action and technical analysis, we can conclude that Real Matters 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 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 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), the Entry Price is assumed to 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 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 where-in 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 where-in 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: 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. 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 21, 2021. 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.