S&P/TSX Composite Index Market Round-Up

Last week, the benchmark S&P/TSX Composite Index (TSX: ^TSX) started on a positive note and made a new lifetime high of 18579.68 (on February 16, 2021). The S&P/TSX composite index closed 76 points down or -0.41% to 18384.27 level on the week ending February 19, 2021. On the weekly chart, the Index recorded a breakout of its horizontal trendline at 18024.46 level and trading above the psychological resistance level of 18000. During the Monday trading session, basic materials and energy were among the top two gaining sectors, while Health care, technology, and utilities were the losing sectors. In addition, the index was trading above the simple moving averages “SMA 21, SMA 50” and has given a golden crossover on the weekly chart, which is positive momentum. 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 ~65.80 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 Current Account, Canadian Markit Mfg PMI and Canadian GDP numbers.

Global Markets Wrap-Up 

The US market witnessed mildly weekly losses last week. S&P 500 dropped from its all-time high and settled at 3906.71 with an overall decline of 0.71%, Dow Jones Industrial Average settled at 31494.32 with an overall gain of ~0.11 %, the Nasdaq composite was down 221 points at 13874.46 while Russell 2000 settled at 2266.69 with an overall weekly loss of ~0.99% for the week ending February 19, 2021.

Global indices retreated last week after taking cues from a rise in bond yields and US jobless claims data released by the Labor department of the US. The US claims for jobless benefits were 861,000 last week, compared with 848,000 in the prior week.

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 Cineplex Inc. (TSX: CGX) and Chemtrade Logistics Income Fund (TSX: CHE.UN) for the next 2-4 weeks duration.

Cineplex Inc. 

Cineplex Inc. (TSX: CGX) is a Canada-based entertainment and media company. The company operates via three segments: Film Entertainment and Content, Media and Amusement and Leisure.

Price Action Analysis (on the Weekly Chart)

CGX stock price has broken out of an inverse head & shoulder (bullish reversal) pattern at CAD 13.06 level on the weekly chart and pushing the price above the previous swing high of CAD 12.45 level. After consolidating in the range of CAD 8.11 – CAD 12.20 for more than 4 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 hovering near the neckline breakout of an inverse head & shoulder pattern. Now, the next resistance level appears to be at CAD 15.80, and the stock, in the short term (2-4 weeks), prices 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 levels, which supports a bullish stance for the stock. The weekly volumes also look supportive of the upside movement. The stock prices are placed well above both the 21-period SMA and 50-period SMA, which is indicating a positive trend for the stock.

Financial Summary:

General Recommendation:

As per the above-mentioned price action and technical indicators analysis, we can conclude that Cineplex Inc. is looking technically well-placed on the chart and we recommend a ‘Speculative 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.  

Chemtrade Logistics Income Fund 

Chemtrade Logistics Income Fund (TSX: CHE.UN) is an industrial chemicals and services company. The company operates in four business segments: Sulphur Products & Performance Chemicals (SPPC), Water Solutions & Specialty Chemicals (WSSC), Electrochemicals (EC) and Corporate (Cor).

Price Action Analysis (on the Weekly Chart)

On the weekly chart, CHE.UN stock price has broken out of its symmetrical triangle pattern at CAD 6.35 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. The stock price is trending upward in the last couple of weeks, forming a series of higher tops and higher bottoms which indicates that bulls are in action. The next important resistance level appears to be at CAD 8.60, and prices may test the level in the 2-4 weeks duration. Any further breakout above the CAD 8.60 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 ~63 levels, indicating a bullish momentum in the prices. 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 Chemtrade Logistics Income Fund is looking technically well-placed on the chart and we recommend a ‘Speculative 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.

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 February 22, 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.