The S&P/TSX Composite dropped 1.8 per cent in the past week to 10:30 am ET Friday morning and now stands lower by 8.3 per cent year to date. The benchmark remains in neutral technical territory based on Relative Strength Index (RSI), about halfway between the buy signal of 30 and the sell signal of 70.
There are 14 stocks on the oversold list of technically attractive TSX stocks trading below the RSI buy signal. There are distinct themes, Potash Corp and Agrium Inc. represent the agriculture sector, while Blackberry Ltd and Mitel Networks Corp represent technology. Energy, as usual, is well represented by Baxtex Energy Corp., Veresen Inc. and Pengrowth Energy Corp. Forestry stocks remain mired in misery – Interfor Corp and Canfor Corp remain on the oversold list.
I picked Mitel Networks as the focus stock this week, in large part because analysts remain so wildly bullish on the company despite a year-to-date decline of 30.1 per cent. Seven of eight analysts covering Mitel rate it buy- and the average target price of $16.95 implies a stunning 97.6-per-cent return in the next 12 months. Investors will have to do their own fundamental homework, but analyst confidence appears unshakable at this point.
RSI has reliably identified profitable entry points for Mitel stocks in the past two years. A buy signal in April 2014 kicked off a 34-per-cent-rally and another in July 2014 was followed by an even better 44-per-cent rise in stock price. The RSI sell signal of 70 has been less reliable than the buy signal.
Mitel Networks stock is volatile and not a great candidate for risk-averse investors. For more adventurous investors willing to do their fundamental homework, it does, however, look promising in light of technical analysis and analyst optimism.
There are currently no overbought, technically vulnerable TSX stocks this week according to RSI
Follow Scott Barlow on Twitter @SBarlow_ROB.
