The TSX Composite Index is overweight materials, financials and energy. We all know that. If you buy a TSX ETF or broad Canadian strategy investment, you are really buying a focused portfolio on those three sectors. But that doesn’t mean there aren’t unique companies within our country that offer diversification away from these three groups.
Individual stock pickers will prevail in the Canadian market. For those who like to look at stocks that have been out of favor – but are showing signs of turnaround- this blog might offer some starting points for exploration. I’ve listed five “fallen angels” that appear to be technically improving. This list is by no means extensive—it’s just a handful of stocks that appear to be turning around. I’d encourage readers to comment below with a few stocks they have observed to be setting up for potential turnarounds.
Please note–I don’t hold positions in any of the stocks listed, and we at ValueTrend haven’t done enough fundamental analysis to endorse them at this time. I’m simply observing some stocks that appear to be setting up technically, with a focus on former dogs. We may or may not decide to invest in any of these names now or in the future. Do your own diligence before investing.
CP rail (CP-T)
CP rail has felt the heat of reduced coal and oil shipments (pardon the pun). The stock has been struggling to stay above its 1-year downtrend. However, a recent peak of $190 took out the last peak(s) of $175, and the stock has had a few successive higher lows. Momentum studies are oversold. So long as $175 is held and the stock can rally off of that level (or close to it), I’d say it looks technically interesting.
This is my least-favorite chart of the group presented today, but it’s still worth a look. Old support at $19 has become neartermed resistance. A break through $19 would imply a $22-23 target. That’s a reasonable, although not overly exciting gain – but its supplemented by a 4% dividend – making the package a bit more enticing for investors. The recent rising troughs are encouraging, but don’t buy the stock unless it breaks out.
AG Growth (AFN-T)
The farming industry in Canada has been a little soft, and this grain processor has felt that pain. The stock seems to be breaking a neckline at just over $36/sh. Momentum studies suggest waiting to see if this level can hold before considering a position in this stock.
Element Financial (EFN-T)
This financing company looks to be showing early signs of breaking its 12-month downtrend. A symmetrical triangle breakout has taken out the last peak while demonstrating higher lows since February. Moneyflow is improving slightly, while short termed momentum (RSI, stochastics) is overbought. MACD meanders in the same triangular pattern as the stock price.
Valeant Pharma (VRX-T)
Could VRX be in the early stages of a complex bottom? The stock has tested about $35 twice, and held. It’s neartermed oversold, as indicated by momentum studies RSI and stochastics. Longer termed momentum indicator MACD appears to be turning down from its recent rally. An outgoing CEO, conflicting views on the company’s integrity and other factors have kept the stock suppressed. At this time, only risk-orientated traders would want to trade off of a bounce from the $35 level with a possible high-$40’s target. Longer termed investors will want to avoid the stock until a neckline break over about $50/sh occurs.