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The Most Overbought and Oversold Stocks on the TSX

Posted on September 20, 2019 by Mathieu Litalien

Disclaimer: The writer of this article may have positions in securities listed below. Stocktrades may also be compensated via affiliate links in the post below

Technical indicators are a great way for investors to help time their investment decisions when purchasing Canadian stocks.

If you’re new to buying stocks in Canada, you’ll likely want to learn about a very important technical indicator.

One of the most common is the 14-day relative strength index (RSI). The 14-day RSI is a momentum indicator that compares bullish and bearish price momentum against a company’s stock price.

Typically, a stock is considered overbought when the indicator is above 70%. It is a sign that the stock may be due for a short-term pullback. On the flip side, an RSI below 30% is an indicator that the stock is in oversold territory and may be due for a short-term bounce.

Investors can use these markers as buy and sell signals to help time their purchases.

Over the past month, the TSX Index has enjoyed a stable and steady uptrend. The S&P/Composite Index is up by 4.2% in the past 30 days. As the Index is touching new highs, it has now reached an RSI of 70 which is a sign that the market may be due for a pull back.

In total, there are currently 41 companies in Overbought territory and only 18 in Oversold territory. Here are the top 10 in each:

MOST OVERBOUGHT

  • Dream Office REIT (TSX:D.UN): 87.78
  • Major Drilling Grp (TSX:MDI): 84.74
  • Great West Lifeco (TSX:GWO): 82.38
  • Power Financial Crop (TSX:PWF): 81.37
  • Power Corp of Canada (TSX:POW): 80.05
  • Royal Bank of Canada (TSX:RY): 79.61
  • Real Matters (TSX:REAL): 79.53
  • Sun Life Financial (TSX:SLF): 78.33
  • First National Financial Corp (TSX:FN): 78.26
  • Canadian Imperial Bank of Commerce (TSX:CM): 77.93

It is not surprising to see the most overbought list littered with financial stocks like Royal Bank of Canada (TSX:RY) and Canadian Imperial Bank of Commerce (TSX:CM). The sector was undervalued and with interest rates dropping south of the border, financials are once again becoming quite attractive. As governments try and stimulate the economy banks stand to benefit. Lower rates will also alleviate some of the fears of a housing crash and the risk of higher impaired loans will subside.

MOST OVERSOLD

  • Indigo Books (TSX:IDG): 21.44
  • Inscape Corp (TSX:INQ): 23.68
  • ROOTS Corp (TSX:ROOT): 24.53
  • Maverix Metals (TSX:MMX): 24.90
  • Nuvo Pharmaceuticals (TSX:NRI): 25.08
  • Royal Nickel Corp (TSX:RNX): 25.52
  • Entrée Resources (TSX:ETG): 26.60
  • Eastmain Res (TSX:ER): 27.29
  • Fortress Global Enterprises (TSX:FGE): 27.83
  • China Gold (TSX:CGG): 28.07

Retailers and mining stocks are at the forefront of those stocks that are oversold. Roots Corp (TSX:ROOT) in particular has had a rough go of it. Slower traffic and distribution issues weight on Q2 results and sent its share price crashing by double digits. Since reporting earnings on September 11th, its stock price has lost 18% of its value.

How will the markets react next week? It will be interesting to see.

Mathieu Litalien

About the author

Mathieu is an individual investor and has been investing part-time for the better part of the past 20 years. He is primarily interested in fundamental analysis, focusing on the long-term and his portfolio is composed primarily of dividend-paying equities. Mathieu has a moderate risk profile and also looks for growth and value. His passion for finance and the markets have led him to his MBA and writing for Seeking Alpha and Stocktrades. Mathieu also focuses primarily on stock research and content production for Stocktrades.ca Premium and the Stocktrades blog.