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.
Manulife (MFC-T)
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.
Transcanada bought a large pipeline for $13 billion called Columbia Pipeline. Sometimes you see a stock going down when there are purchases of other companies. However, with pipelines so much in the headlines would it be too early to call this one a buy. The dividend is around 4.3%. Do you see this one going anywhere? Would buying a position at this time be a good approach?
There is some relationship of the pipes with energy–so bear that in mind John–so buy the pipes if you like energy.
TRP has some resistance in the $53-$55 area.
Love posts where instead of looking at a sector ETF like XEG, you go pick stocks from different sectors and analyse their charts. Helpful to new investors learning how to pick entries better.
Personally, I like it more when Keith looks at sector ETFs. I prefer to play a trend through a basket than an individual stock… “once bitten, twice shy” as they say 😉
What do you think about the Westjet chart? it reached a low of $15 on February 12, 2016 and since then has been climbing up breaking the downward trendline. Would you add the stock to the ” angel list”?
Yes, another good fallen angel chart–WJA, AC, TFI, CP are among the transport stocks breaking downtrends.
Hi Keith,
How do you select stocks, like the above, that have a favourable chart. Do you actually look at chart after chart for a group of stocks, say the TSE300, or do you apply some type of screen to provide a subset of potential charts?
I tend to rip through lots of charts based on lots of sources. In this case, I was deliberately looking for stocks that were not in energy, materials, banks, and I wanted to look at fallen angels. I mainly pulled up lists of sector ETF’s such as industrial’s etc–and started firing through their charts–I also examined a few stocks that I knew from just overall market news that were under performers like BBD, PJC.a, etc.
Hi Keith,
I like this post. I have traded several of these names since Feb when their valuations were insanely cheap with their P/E in the single digits and early technical set-ups presenting themselves on the charts. Energy and Mining were the most glaring mis-priced stocks at the time. I also played WJA with a strong spring seasonal period, very cheap valuation, and technical set-up.
Value companies, that were seasonal, and had early signs of a technical reversal, started to become a them for me. I noticed that many of them, like CP and WJA, were excellent companies from an operational perspective, but because they were based in Calgary, got caught up in the the negative news hype and media noise around oil. I really like these “good companies but mis-priced” type of stocks in this low growth environment as I think the downside is more limited.
So anyway, most of these stocks have already had a rally. So I agree that stock picking is even more important at this time now that valuation and seasonal factors are less favorable. I’m focusing more on pattern trades now and have come up with some names to watch. Some are on your list and there are still others less known names in the Energy/Materials space that are interesting (but precious few). I’m also still watching the inverse market and sector ETF’s for some confirming signals.
Any other trading ideas welcomed and appreciated!
I would like your opinion on safety, income and capital gains from some stocks. I currently own some Altagas at slightly lower levels. What is your opinion on the safety, dividend and upside of this stock? Would you continue to hold it? Do you think Fortis would be a good stock to have for a safe reliable dividend and possible growth? What is your opinion on Medtronic in the health care sector? There have been 45,000 people in Europe who have had successful transcatheter valve replacements. There is a study of 2,500 people in this country for valve replacement using transcatheter replacement and conventional open heart surgery. Do you think Blackrock would be a good stock to have with the outlook for the market and money flows into their ETFs? Thanks.
John I cant really do individual stocks held by investors on this blog , lest I be caught up in doing commentary on everyone’s favorite stocks every day. I am, however, on BNN on Monday at 1:00pm
Call in with questions during the show’s live taping between 1:00 and 2:00 pm. The toll free number for questions is 1 855 326 6266. You can also email questions ahead of time to marketcall@bnn.ca – it’s important that you specify they are for me.