Canadian sectors: In search of trending or sideways stocks

A quick shout-out to reader Bill, who rattled my cage and reminded me to write this blog – which I had promised to write after doing an April 18^th blog on the major US sectors.

So….Let’s have at it, shall we? The TSX composite is comprised of 9 main sectors. They are, with their approximate weightings:

Financials (banks, insurance)          35%

Energy (oil, gas etc)                           20%

Materials                                             12%

Industrials                                           10%

Consumer Discretionary                   5%

Utilities                                                 5%

Staples                                                   4%

Technology                                           4%

Healthcare                                            1%

Other-  5%

There are no ETF’s to look at for the Canadian Consumer Discretionary, Telecom or Healthcare sectors. Thus, I will look at the other  sectors today. It should be noted that these major sectors are pretty broad, just as with the SPDR ETF’s covering the major US sectors. For example, it’s pretty hard to look at the charts of the banks vs. insurance and say they are moving the same. Same goes with the energy sector (gas is flat, oil is up, so producers more influenced in one product have differing chart patterns). Materials include chemicals, forestry and industrial metals—differing patterns. And so on. So please take these charts as a starting point. If you like the look of a sector, it may be worthwhile to tear it down and find out the sub-sector that is doing all the work. Conversely, if one sector looks bad – dig deeper to see if it’s because of one industry. Minor sectors like real estate stocks, etc are not covered.

Financials (XFN)

Although the recent low on XFN looks to be holding support (last trough) – that’s a bit of a question. The last low (Feb) had a low that was below its close lining up with the March low – but Marches low closed the week lower than February’s trough. It’s below the 200 day SMA. The Canadian banks are the culprits – I looked at BMO’s popular ZEB Equal Wt. bank ETF and its made a lower low, whereas the insurance stocks seem to be holding their lows.

Energy (XEG)

Energy looks pretty good. The chart suggests that the sector is still in the consolidation phase. But it’s not an ugly picture by any stretch. Breakouts through $13, then $14-ish would be required to rid the sector of its long held ceilings.

Materials (XMA)

If I was a lady, I’d be a Material Girl (as sang by Madonna in the 1980’s).

Although as that material girl, I’d probably focus my material desires on the forestry sector, given its strength vs. the wide range of patterns occurring within the sectors sub-groups. The mishmash has created a very sideways volatile chart profile without a breakout through the mid $14/sh area since 2014.

Industrials (ZIN)

Continuing with the musical references from the 1980’s – does anyone recall that silly song by Dire Straits called Industrial Disease?  Its goofy, but catchy!

This chart shows no signs of industrial disease. It’s in a pretty snappy uptrend.

Utilities (ZUT)

I’ve refrained from using many of BMO’s ETF’s in this exercise (despite the fact that I buy them for our managed accounts) because many of their sector ETF’s are equal weighted. Not a bad thing for an investor- but less reflective of the sector and its individual component weightings. This ETF is one of the more widely followed ETF’s in the sector so I decided to post its chart anyway. Anyhow—the chart tells you what you need to know. Yeech!. It’s not at all looking like the US utilities (per the US sector blog).

Consumer Staples (XST)

This chart shows a pattern that is as flat as a politicians brainwaves – well, at least one who practices hyperbolic discounting per my blog last week . The year 2017 saw two declining peaks within that sideways pattern of this ETF, but the $51-ish support level is holding. Looks like a trading candidate to me. Lots of sideways stocks in this group. Not much of a case for holding long term unless it breaks the pattern.

Technology (XIT)

Way back in January, I covered this sector.

Although it was a bit overbought – and had to come back – the sector still looks technically on trend. As the popular millennial verbiage goes – the chart “slays”, is “perfect”, with “no worries” and is “not a problem”. Damn I sound like a cranky old man sometimes! And to think, only 40 years ago, I was cool…..or at least I (wrongly, no doubt) I imagined I was….

BNN tomorrow….catch it if you can

MarketCall Tuesday May 1 at 6:00pm

Keith appears regularly on BNN MarketCall to answer viewer questions on the technical analysis of stock trends, and to provide unique insights on the factors of technical analysis used in successful investment management.

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