It was an excellent day yet again for material stocks, even with the price of gold falling for the first time in three days. On the contrary, cannabis stocks suffered large losses nearly industry wide, as market sentiment continues to hammer marijuana stocks down amidst frustrations due to lack of profitability and poor income statements.
The TSX gained 0.39% today, while American markets are all in the red.
First Quantum Minerals: +10.34%
OceanaGold Corp: +5.15%
CES Energy Solutions: +4.37%
IAmGold Corp: +4.15%
Barrick Gold Corp: +3.76%
B2Gold Corp: +3.74%
Detour Gold Corp: +3.61%
Torex Gold Resources: +3.60%
As you can see, most of the companies in the green today are from the materials sector, particularly gold mining companies. So why the bullish outlook? Well, with the Fed cutting interest rates, it is rumored that Canada is due to follow. And although there is no definite correlation between the price of gold and gold stocks in low-interest rate environments, the general sentiment is often that gold tends to outperform in lower interest rate situations.
It will be interesting to see what the Bank of Canada does, but it is likely they will follow suit in lowering interest rates amidst a weakening global economy and trade wars.
Cannabis and energy stocks a large part of the TSX’s losers
Investors are growing tired of missed earnings expectations and delayed profitability outlooks for cannabis stocks, and thus far in 2019 the markets have reacted as such. Energy stocks witnessed a large spike due to fears of global supply after the drone strike in Saudi Arabia, and the long term effects on production are still generally unknown. Expectations have settled, and after posting substantial one day gains, most are falling back to extremely bearish trading prices prior to the drone strike.
Here are the biggest movers in the red today on the TSX
Canopy Growth Corporation: -8.71%
Trican Well Services: -4.80%
Aphria Inc: -3.83%
Western Forest Products: -3.03%
Peyto Exploration: -2.81%
Aurora Cannabis: -2.71%
Encana Corp: -2.69%
Birchcliff Energy: -2.63%
Canopy and First Quantum both enter oversold and overbought territory
We could see a reverse in fortunes for both the biggest gainer and loser on the TSX today, as both stocks have hit respective 14 day RSI levels that deem today’s price movements overdone. Canopy Growth (TSX:WEED) reached an RSI of 26 today, firmly placing the stock in oversold territory. On the flip side, First Quantum Minerals (TSX:FM) temporarily hit RSI levels above 70.
We could see material stocks continue to rise amidst poor economic outlook, but it will be interesting to see where the Canadian cannabis industry goes from here. The sector has been hit hard in 2019, and Canopy Growth is currently trading at less than half of its mid 2018 high of $70.98 a share.