Canada Market Round-Up

The benchmark S&P/TSX Composite Index (TSX: ^TSX) started last week on a negative note and maintained the bearish tone for the entire week. The S&P/TSX composite index declined by 138.39 points (0.65%) to 21084.45 for the week ending January 07, 2022. On Monday, the index again maintains its bearish momentum tracking US indices and closed at 21072.32, down by 12.13 points or ~0.06%. Overall domestic markets are currently hovering in a range. Last week mixed data events not able to provide any clear direction to the index prices. As per the Statistics Canada the Canadian total value of building permits rose 6.8% to $11.2 billion in November 2021 compared to $10.3 billion in October 2021. The weekly chart indicates that the index witnessed a breakout of the rising wedge pattern and trading below the lower band of the pattern. Moreover, prices are trading around the 21-period SMA. The immediate resistance level of the index is 21200, while the immediate support exists at 20400. On the weekly time frame, RSI is trading at ~56.35 levels, indicating positive momentum.

The upcoming major economic events that may impact the Canadian market sentiment include US CPI m/m data, US PPI m/m data and Initial Jobless Claims data and BOC Business Outlook Survey data released Quarterly.

Global Markets Wrap-Up 

For the week ending January 07, 2022, S&P 500 closed at 4538.43, down by ~1.22%. Moreover, the Nasdaq composite also declined by 2.62% and settled at 15085.47. Russell 2000 ended the week at 2179.81, reflecting a sharp decline of ~2.91%. Meanwhile, US indices decreased last week amid increased US unemployment claims data. The seasonally adjusted initial US unemployment claims data published by the US Department of Labor, increased by 28k to 222k for the week ending 27th November 2021 against the revised unemployment claims at 194k in the prior week.

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 Champion Iron Ltd. (TSX: CIA) and GoldMining Inc. (TSX: GOLD) for the next 2-4 weeks' duration.

Champion Iron Ltd. 

Champion Iron Ltd. (TSX: CIA) is a Canada-based iron-ore exploration and development company. The Company business segments includes Mine Site, Exploration and Evaluation, and Corporate.

Price Action Analysis (on the Weekly Chart)

On the weekly chart, CIA stock price witnessed a breakout of the downward sloping trend line at CAD 5.10 level (on January 03, 2022). Since the breakout, prices are sustaining above the breakout level, which indicates bulls are in action. Prices are also getting support of the rising trend line that further supports our bullish stance. Now, the next resistance level appears to be at CAD 6.40, 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 ~59.72 levels indicating positive momentum in the price. The weekly volumes also seem supportive for the upside movement. Moreover, the stock is trading above 21-period and 50-period SMA, indicating bullish momentum.

 Financial Summary:

General Recommendation:

As per the above-mentioned price action and technical analysis, we can conclude that Champion Iron Ltd. is looking technically well-placed on the chart. Therefore, we recommend a 'Buy' rating on the stock. Investment decisions should be made depending on the investor's appetite for upside potential, risks, and 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.

GoldMining Inc. 

GoldMining Inc. (TSX: GOLD) is a gold exploration company. The company operates in gold and copper projects based in Canada, US, Brazil, Columbia and Peru.

Price Action Analysis (on the weekly chart)

On the weekly chart, GOLD stock prices recently broke the downward sloping trend line and continuously taking support of the same. Now, the next resistance level appears to be at CAD 2.29, 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 ~57.51 levels, indicating positive momentum. The weekly volumes also seem supportive for the upside movement. Moreover, the stock is trading above 21-period and 50-period SMA, which may act as a support level for the prices.

Financial Summary:

General Recommendation:

As per the above-mentioned price action and technical analysis, we can conclude that GoldMining Inc. looks technically well-placed on the chart. Therefore, we recommend a 'Speculative Buy' rating on the stock. Investment decisions should be made depending on the investor's appetite for upside potential, risks, and 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.

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 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 the 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 unfavorable 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 January 11, 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.