Canadian sectors: In search of trending or sideways stocks

April 30, 20189 Comments

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 18th 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.

If you have questions about the technical analysis of stock trends for individual stocks, be sure to phone in with your questions for Keith during these shows.

Call Toll-Free 1-855-326-6266

Or email your questions ahead of time (specify they are for Keith) to [email protected]

9 Comments

  • Hi Keith,
    As the markets continue going sideways, at some point does it stop being a descending triangle (topping pattern) and roll into another pattern? It seems like there is pressure to break but it doesn’t want to.

    Reply
    • good observation re the descending triangle. Yes, I have been watching it for a break, and even talked of that pattern on the BNN show last night at one point. the only thing you can do is to wait for a break out or down. As it consolidates, it is not in our discipline to make a grand call other than raising a bit of cash for seasonal reasons.
      BTW–another factor I will use on raising cash is the Bear-o-meter reading, and I hope to post its net value today (Thursday) via a new blog.

      Reply
  • I wonder if a Nafta announcement is the thing that could send it in either direction.

    Reply
    • the market always looks for a ‘reason” to move in the direction that the charts suggest is pending–so to your point, it could be.

      Reply
  • Hi Keith,

    I have followed your blog for some time and enjoy your postings and your musical references.

    When the time comes to sell, is it a wholesale selloff or are there certain sectors and/or stocks worth holding through the ride down?

    Thanks

    Reply
    • Hi Vince
      Yes, one of my clients was pleased to see a David Wilcox reference the other day. I’m a teenager of the 1970’s, so I grew up in the epic rock n roll era–still the best groups ever. And I still listen to hard rock, age did not change that! BTW–kinda liking some of the “new” hard rock like Disturbed and a couple of others.
      Anyhow, NO – I never wholesale sell. First, who will ever be 100% assured of being correct in a market assessment? Recall my notes on the Bear-o-meter–risk and reward both exist at all times. So if I went 100% cash I’m basically stating I “know” what will happen. I “know” nothing – except the relative rating of risk to reward at a given moment. Its a relative thing- not an absolute. We have a strategy where we leg out as conditions deteriorate. we will start at 10-15% cash and usually move no higher than 50% cash.
      Sectors to hold in a selloff include staples, utilities, US dollars–as discussed in this blog: https://www.valuetrend.ca/what-to-hold-when-stocks-fall/

      Reply
  • Hi Keith,

    As per our discussion via email, is using Technical Analysis the best way to grow an account? I’ve heard it said that Buy and Hold is the only way to grow and preserve your capital. But I’m starting to wonder if that is merely a sales strategy for Financial Advisors.

    I have often struggled myself between buying and holding vs position trading. Is it best to “find a bullish set-up, buy, take profits and move on”?

    Thanks,

    Dave

    Reply
    • Dave–thanks–I just wrote your question into a full blog–being posted today!

      Reply

Leave a Reply

Your email address will not be published. Required fields are marked *

11 − four =

Topics

Topics

Recent Posts

S&P sector weighting

TSX looks bullish in spite of itself

gold

Gold oversold: Time to be bold, or should it be sold?

TAN

Green energy stocks extremely overbought

dow theory

Bear-o-meter neutral, with some caveats

gsci

What does a commodity bull market look like?

pink_flamingos_1050x700

Short termed momentum indicators suggest a minor correction pending

cta-bg

Never Miss an Opportunity

Sign up for our newsletter to receive valuable insights that are available only to subscribers.   Beyond the blog – beyond the videos – get the inside scoop.

Scroll to Top