MONICA RIZK and RON MEISELS
Special to The Globe and Mail
Published Thursday, Oct. 22, 2015 7:17PM EDT
What are we looking at?
Canadian stocks on a positive trend.
We limited our pool to the S&P/TSX 60 index.
To find the most positive, we looked at each stock’s 40-week moving average (40wMA). This is the average closing price for the stock over a period of 40 weeks. Charting the moving average week by week gives us a sense of investors’ behaviour: Are they growing more (or less) enthusiastic about the company’s outlook and are they more (or less) likely to purchase the stock?
Generally speaking, stocks that trade above their rising 40wMAs are the best candidates for investments; they are the ones that show a bullish pattern. We listed only the stocks that are currently trading above their rising 40wMA at this time in the adjoining table.
We chose this indicator because stocks tend to stay relatively close to their 40wMAs.
When stocks rise far above this average, investors often use this as an opportunity for profit taking, since this usually leads to a price correction toward the 40wMA.
Similarly, when stocks decline far below this average investors can usually expect a recovery rally to follow toward the average, providing a selling opportunity.
Despite the weak market action in August and September, there are numerous stocks that are still positive at this time.
More about Phases & Cycles
Phases & Cycles Inc. has been providing independent research for more than 25 years, using Behaviour Analysis. It publishes investment ideas for both the Canadian and U.S. equity markets. Its research reaches more than 1,000 users across North America and Europe.
What did we find?
There are 10 stocks in the S&P/TSX 60 index that meet our criteria. A large portion of these fall within the consumer discretionary/staple sectors, indicating that these sectors are the most attractive at this time.
Stocks that are currently suitable for investment include: BCE, George Weston, Loblaw, Metro and CIBC.
These are currently trading above but near their rising 40wMAs and have recently started a new up-leg. At the same time, Alimentation Couche-Tard and Rogers Communications are currently extremely overbought and will likely have a pullback toward their 40wMAs. Although Agnico Eagle Mines meets our criteria, only a sustained rise above $41 to $42 would signal a new up-leg for this stock.
Readers should consult a professional before making investment decisions.
Ron Meisels is the director of research and Monica Rizk is the senior technical analyst for Phases & Cycles Inc. They may hold shares in companies profiled.
Upward-trending Canadian and U.S. stocks