Canada Market Round-Up

The benchmark S&P/TSX Venture Composite Index (TSX: ^TSXV) started the last week on a positive note but sold off from higher levels. The S&P/TSX Venture composite index decreased by 8.23 points 1.14% to 711.88 for the week ending on June 10, 2022. The weekly chart indicates that the index prices are trading above the horizontal support trendline. On the contrary, the prices are trading below the 21- period & 50-period SMA, which can act as resistance in the near term for the index.  Utilities was the leading sectors, while Healthcare, Basic Materials, Technology, Industrials, Energy, Financial were the laggard on Thursday.  The immediate resistance for the index is around 745, while the immediate support exists at around 680 levels. On the weekly time frame, RSI is pointing at ~30.45 levels, which is close to the oversold territory and any bounce from here can take the index towards the north.

On the macro front, the upcoming major economic events that may impact the Canadian market sentiment include Employment Change, Unemployment Rate, Consumer Price Index (CPI), Producer Price Index (PPI), Core Retail Sales, Federal Funds Rate.

Source: REFINITIV, Analysis: Kalkine Group

Global Markets Wrap-Up 

On June 9, 2022, the S&P 500 index settled at 4017.82 with a WTD (week till date) loss of ~2.21%, and the tech-heavy Nasdaq composite was also decreased by ~2.22% (WTD) and settled at 12269.78, whereas Russell 2000 ended the week at 1850.86, reflecting a loss of ~1.71%.

Considering the US market's performance over the last week, following the major global macros and data front, and analysing the S&P/TSXV Composite Index, one TSXV and another TSX listed stock fit the maximum criteria on the technical framework. The recommendations are based on the generic insights, entry price, target prices, and stop-loss for Lucero Energy Corp.    (TSXV: LOU) and Forza Petroleum Limited (TSX: FORZ) for the next 2-6 weeks.

Lucero Energy Corp.

Lucero Energy Corp (TSXV: LOU) is a private oil firm specializing in the acquisition, development, and production of oil-weighted properties in the Bakken and Three Forks formations in North Dakota's Williston Basin.

Price Action Analysis (on the Weekly Chart)

On the weekly chart, LOU’s price is taking support at the rising trendline line. The stock price has recently started to move up, after taking support at the same trend line, indicating the possibility of an upside movement hereon. The weekly volumes also seem supportive, further indicating positive biasness coming into the price action. The next resistance level is plotted around CAD 1.20, and the stock may test that level in the short term (2-6 weeks).

 Source: REFINITIV, Analysis: Kalkine Group

  

 Technical Analysis (On the Weekly Chart)

On the weekly chart, The CMP (current market price) is below the trend-following indicator 21-period SMA and 50-period SMA. The leading indicator RSI (14-period) is also reversing from lower levels and is currently at the 43.34 level. The weekly volumes also seem supportive of an upside movement.

General Recommendation:

As per the above-mentioned price action and technical analysis, we can conclude that Lucero Energy Corp,  is 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. Markets are trading in a highly volatile zone currently due to certain macroeconomic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing. Below is the summary of our recommendation.

Forza Petroleum Limited

Forza Petroleum Ltd (TSX: FORZ) acquires and develops exploration and production assets to produce hydrocarbons and expand oil and gas reserves. The corporation owns and operates the Hawler licencing area in Iraq's Kurdistan Region.

Price Action Analysis (on the weekly chart)

On the weekly chart, FORZ’s prices are trading above the horizontal support line. The stock price has recently started to move up, after taking support at the same trend line, indicating the possibility of an upside movement hereon. The weekly volumes also seem supportive, further indicating positive biasness coming into the price action. The next resistance level is plotted around CAD 0.285, and the stock may test that level in the short term (2-6 weeks).

Source: REFINITIV, Analysis: Kalkine Group

Technical Indicators Analysis (On the weekly Chart)

On the weekly chart, The CMP (current market price) is above the trend-following indicator 50-period SMA. The leading indicator RSI (14-period) is currently pointing at 51.11 levels and heading towards the north, which is very supportive for the stock to follow the same in coming weeks.

General Recommendation:

As per the above-mentioned price action and technical analysis, Forza Petroleum Ltd seems to be 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. Markets are trading in a highly volatile zone currently due to certain macroeconomic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing. 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 Gross Domestic Product (GDP), Manufacturing PMI, 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 2-6 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 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 9, 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.

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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.