Sid Mokhtari, chief market technician at CIBC Capital Markets.Supplied
North American equity markets continue to trend higher with the S&P/TSX Composite Index and S&P 500 flirting with record levels.
On May 9, The Globe and Mail spoke with CIBC’s chief market technician, Sid Mokhtari, to get his technical take on the strong market momentum and the stocks driving the indexes higher.
Mr. Mokhtari has a successful track record of identifying stocks with strong technical and quantitative characteristics that may lead to portfolio outperformance. He publishes a monthly report with his top 10 stock ideas. His stock selections have outperformed the S&P/TSX Composite Index for the past four calendar years.
Here is part two of our interview, where he answers readers’ questions, including a discussion on potential buying opportunities for income investors as well as his thoughts on a ‘Magnificent 7’ stock that he believes may be poised to break out.
In part one, which was published earlier this week, Mr. Mokhtari provided his market outlook and discussed investments that are ranking highly in his models.
I received several questions from readers on the construction of your monthly Top 10 best ideas portfolio. First off, what prices are your buys and sells based on?
On the first business day of the month, we take the intraday high, intraday low and the closing price then divide the sum by three, and that is our buy price.
We do the same thing on the last business day of the month, sum the intraday high, intraday low and the closing price and then divide by three.
The spread between the two is the profit or loss.
Do you have sector exposure limits?
We have to have an allocation of four sectors at a minimum.
What is the maximum number of stocks that you will hold in a given sector?
Historically, holding four stocks in a sector has been our maximum. We have never exceeded four.
When you are selecting stocks, do you consider macro influences?
We have an asset allocation matrix that we run and we take a look at it to see what assets are coming in and what’s impacting them and we see whether or not those are being reflected in our matrices.
We stay focused on the quant and technical rankings in our models. If we see that things are extremely overbought in our models, we recognize the risk.
We always focus on the improving and leading quads within our matrices and not as much on the consolidation or lagging quads.
We try to focus on stocks that are in our improving quad, which are not as overbought as stocks in our leading quad. And we also know that the improving quad is typically carrying stocks that eventually rotate into our leading quad.
Multiple readers want to know if you have recommendations for relatively stable investments that offer attractive yields.
Every investor should do their own due diligence, but I am very comfortable with several managers that we deal with on the Street. I know the managers, and I’ve seen their performance, and know their styles in terms of the models that they run.
Again, everyone has to do their own due diligence, particularly when it comes to a retirement allocation as well as a yield that you’re looking for, and you have to be very mindful of your risk profile.
AGF has a product that we like, AGF Enhanced U.S. Equity Income Fund (AENU-NE). I think U.S. equities are still where you can get a lot of alpha down the road. It’s not leveraged. The fund targets around a 7 per cent yield and pays income monthly.
Another one that I like is J.P. Morgan’s U.S. Equity Premium Income Active ETF (JEPI-A). It’s one of the biggest income ETFs. It’s well known and has been around for quite some time. Like I said, you have to do your own due diligence, but I think it’s definitely worth reviewing. It has a yield of over 7 to 8 per cent. It will have withholding tax.
Middlefield Real Estate Dividend ETF (MREL-T) pays income monthly. It offers a very good yield with a very active management style in the REIT space.
If you want to talk about a cash version of an investment, I’m comfortable with Som Seif’s products at Purpose Investments. They produce products that are very economically oriented for investors with low management fees. With Purpose Cash Management Fund (MNY-T) instead of putting cash into a bank that you don’t want to do anything with it but you want to get good yield on it, MNY is an option.
I noticed Brookfield Renewable Partners LP (BEP-UN-T) rose 54 points to the number one position in your matrix for the TSX 100 - and it has a high yield.
There are two names that I highly advocate investors to constantly review and Brookfield Renewable Partners is one of them. Brookfield Infrastructure Partners (BIP-UN-T) is the other one. They both show quite well in our work.
BEP is a very strong technical name for us. As well, I know the fundamental desk likes it. It has a measured move that can extend toward $50 plus. Volume readings are very supportive on rallies. Pullbacks are on thinner volume. Moving averages are going in the right direction. We have a lot of good signals. It is very much tied to the power we need for data centers. So, there’s a lot of positive here for BEP that investors can appreciate.
Now, I have a few stock specific questions. One reader asked, “A number of companies have come under pressure as a result of developing the AI narrative, including Accenture (ACN-N). As an investor who strives to capture market inefficiencies, I was wondering how ACN might rank in your screens?”
So ACN is a holding in the software index IGV [iShares Expanded Tech-Software Sector ETF]. It has been under pressure since early 2025 with software stocks coming under pressure.
I think that we are in a very late-stage decline for ACN. In other words, selling pressure is likely to begin to subside. The space is deeply oversold. We do know that it can bounce, but we also have the view that bounces are not likely to easily recover. So, there will be a period of mean reversion. For ACN, we can envision US$211 to as high as US$220 being the best-case scenario on a bounce perspective, but it does have a lot of downside pressures still from a trend perspective.
Can you share your thoughts with readers on BlackBerry (BB-T) and Telus (T-T)?
BlackBerry is a name that broke out of a very sizable base that goes back to 2023. The stock has gone through US$5 and can measure towards US$7.70 to as high as US$9. It’s a name that is very overbought but it’s a name that has also cleared a lot of bands of resistance. So, we’re in a better environment from a trend following or breakout pivot perspective. It’s a name that we also like fundamentally. I think that any pullbacks in the name are probably going to be met with better buying, a name that we are advocating for dip buying.
Telus is in a late-stage decline. Your downside is limited. We think this is one of the weaker names within the telecom space. We favour Rogers (RCI-B-T) and Quebecor (QBR-B-T), as well as BCE (BCE-T).
Finally, multiple readers are asking about U.S. stock ideas so I have a question for you. You also maintain a scorecard for the OEX index, the top 100 companies in the S&P 500, and the NDX index, the top 100 companies in the NASDAQ. Can you highlight a few names from these indices that have attractive technical and quantitative characteristics?
I think Nvidia (NVDA-Q) is just about to breakout of its range. The stock is about 5 per cent over its monthly average. It’s a name that has lagged a little bit relative to its peers. So, I think it’s a name that is probably going to reward investors. If you want to have exposure to the chip industry as well as the semis, I think Nvidia would be a good choice.
Nvidia measures toward US$240 as an initial measured move. The next level is closer to US$270 on the upside to as high as US$278. Downside support is pegged against US$200 and US$187.
The other one that is slower from an alpha as well as momentum perspective but is certainly picking up a lot of delta in our model is Apple (AAPL-Q). Apple is printing a weekly and monthly buy signal, so I think it’s a good name. Apple is a name that pauses and refreshes. It tends to consolidate for three to six months before it re-accelerates. Apple’s breakout above US$280 measures toward US$316. It’s a new buy signal for us in our model. Apple has picked up 38 points of delta and is now ranked number 17 out of 100 stocks in the OEX. I think the measured move for Apple is closer to US$316 to as high as US$320.
Finally, Eli Lilly (LLY-N) is a name that has been in a sideway consolidation and is picking up a lot of delta in our model. Eli Lilly that has been rebuilding itself quite well on a technical basis and quant basis. Downside support is at US$865. A measured move on the upside is US$1,100, US$1,180, and potentially even higher. Numbers have been great on a fundamental basis. The EPS [earnings per share] estimate revisions have been great. Sales have been great. So, it does have a lot of good fundamental backing.
This Q&A has been edited for clarity.