Well. Good morning everyone and welcome to Wednesday morning. It's Stephen Whiteside here from theuptrend.com with today's look at Canadian Stock Market Trends.
In the premarket this morning stock index futures on both sides of the border are below fair value, so far it looks like we're going to see some selling at the open on Wednesday morning. Commodities are mixed, but both gold and crude oil are higher in the premarket.
Let's start off today's presentation with a quick look at the U.S. stock market, starting with the VIX or the fear index. The fear index is back on a sell signal as of Tuesday's close, and that of course can be supportive for higher stock prices. The DIA, Dow Diamonds ETF is still on a buy signal, that has not changed. Now the SPY, SPDR S&P 500 ETF and the QQQ, Nasdaq 100 ETF have come back on buy signals as of Tuesday's close.
Now when you walk away from those big-cap stocks and you look at the rest of the U.S. stock market, the picture isn't as pretty. And so we still have mid-cap, small-cap and micro-cap stocks on sell signals right now. So it's just those major big-cap stocks that are holding the U.S. market up at the moment.
Let's move on and take a look at the Canadian stock market. And if you were with us last week, we were looking at a market being held in check by the April highs. That is still the case a week later. Now, we did see a little volatility in the Canadian market. The TSX and the TSX 60 traded through the lower channel line last week and they have come back, as did the iShares S&P/TSX 60 Index ETF (XIU.TO). We had a little more volatility in the Horizon BetaPro products in which the bear BetaPro S&P/TSX 60 -2x Daily Bear ETF (HXD.TO) gave us a buy signal and now a sell signal. And the BetaPro S&P/TSX 60 2x Daily Bull ETF (HXU.TO) gave us a sell signal and now we're back on a buy signal.
Looking at the rest of the market, and unlike the U.S. market, it's the S&P/TSX Canadian MidCap (SPTSEM) and S&P/TSX SmallCap Index (^SPTSES) leading the market higher right now. The micro-caps are still playing catchup, but they're currently on a buy signal.
Looking at the TSX most actives from Tuesday's trading action, Barrick Gold Corporation (ABX.TO) was the most actively traded stock. No early warning signal just yet, and we're still trying to break out above 22,66. Next target to the upside is 23,44. And looking down on Wednesday, we need to close below 21,44, and we're not expecting that to happen.
Next up, we're looking at a B2Gold Corp. (BTO.TO), and unlike Barrick, B2Gold does have a new early warning signal up there. We are trying to break away from 4,30. We're having trouble doing so. Remember if you look to the left, you'll see we peaked up at this level back in February, and so our next target to the upside is 4,49. Looking down on Wednesday, we need to close below $4.08 to give us a new daily sell signal for B2Gold. If that does not happen on Wednesday, of course that lower channel line is going to continue to move higher daily.
Next up we're looking at Encana Corporation (ECA.TO), and this stock is still having trouble getting off the floor. We did have a recent buy signal that was followed two days later by a sell signal. On Wednesday we're looking for a close above $6.25 to give us a new buy signal for Encana.
Our next stock this morning is the Royal Bank of Canada (RY.TO) and it looks like it's treading water here, but it has made a series of higher lows and so that is certainly a bullish sign. Now the Royal Bank is now back on a buy signal as of Tuesday's close. Our next mathematical target to the upside is 106,25, but you can see that over the last month we've peaked just below that level and that of course is the big round number of 106. That is what traders were focused on. If we can break out above 106,25, then our next target to the upside is 107,81. And if you look back, that is where we peaked back in April.
Now there's not a lot of capital gains to be made on the Royal Bank, so I would not advise people trading any of the Canadian banks. If you look at the Fly Paper channel for the Royal Bank, you can see it's extremely wide. If you look down here, you can see that the average true range is under three quarters of a percent, so there's very little volatility in this stock. It certainly moves up and down every day, but as a percentage of the value of the stock, the volatility is extremely low. And so this is not really a tradable stock. It is on the most active list of course, so people are trading it, but there's not a lot of capital gains to be made.
And so there's a trade-off here. This is an incredibly safe stock. It pays a regular dividend and a lot of people are interested in that. As a trader, I'm not interested in that. And if you compare that to Barrick, for example, the most actively traded stock today, you can see how thin the Fly Paper channel is, just as a visual clue that there's a lot more volatility in this stock. And if you go over here, the average true range is approximately a little less than 400% more than the Royal Bank. So the opportunity to make capital gains and capital losses in Barrick is much more than the Royal Bank. So you can't compare the two. Just the fact that they're in the most active list doesn't mean you can compare one opportunity to the next. If a buy signal in the Royal Bank comes up and a buy signal in Barrick comes up, they're two completely different things. Yes, they're both buy signals, but one has a lot more risk and opportunity than the other one has.
Our next stock this morning is Yamana Gold Inc. (YRI.TO). Yamana is the gold stock that I follow and we have a new early warning signal up there. Trying to get up to 3,91. You can see that where we peaked back earlier this year is the 3,71 level, and we've started to try to trade above that. We're having trouble doing so, and that's the norm. That's what I would expect to happen. We closed lower yesterday. We're still above the upper channel line and so on Wednesday we're looking for a close below $3.45.
Next up we're looking at Crescent Point Energy Corp. (CPG.TO), and this is a stock that's having trouble getting going again, but we are finding support at 3,91 and finding resistance at 4,50. So we're now back on a buy signal as of Tuesday's close. And of course if we can break out above 4,50, then 4,69, 5,08 come into play. And you can see there's an open gap back here, between 4,69 and 5,08, that could act as a target for this particular stock, if we can get up over 4,50.
Our next stock this morning is SNC-Lavalin Group Inc. (SNC.TO) and once again SNC had a big bad day on Tuesday. On Friday we were looking for a momentum shift and the indicator went off. We needed to close above 25,69 to give us a buy signal. We closed at 25,51 so no buy signal there. And once again the stock collapsed yesterday. And this has happened many times over the past year, and so we're still looking for lower prices here. On Friday if you were short this stock, you would've had a buy order in at 21,88. Congratulations, that buy order got filled yesterday. And then we're still looking for lower prices here. We should be able to find psychological support at $20. If that breaks, then 18,75 is our next target.
Now there's lots more gold stocks on the most active list, of course, they're all going to look the same. They're all going to look pretty similar to the index and the ETFs for the gold sector, so we don't need to look at those.
IAMGOLD Corporation (IMG.TO)
Kinross Gold Corporation (K.TO)
Aurora Cannabis Inc. (ACB.TO), still a very broken stock. Here you can see the elongated pressure zone across the bottom of the screen. You can see that we broke through the Fly Paper channel, so it's a completely different group of people trading the stock than they were last year. Last year everybody was happy to buy the dips. Now everybody's happy to sell the rips. And so once you're under the Fly Paper channel, the whole psychology of a stock changes from when it's above the Fly Paper channel. All the people up here have probably left, and we're going to continue to look for lower prices here. We're holding support at 8,59. If that breaks, 7,81, and of course you can round that up to $8. We'd look for support at $8. If that broke, 7,81. And then looking up on Wednesday, we're looking for a close above $9.44 to give us a buy signal. Not expecting that to happen.
And our last stock this morning is CannTrust Holdings Inc. (TRST.TO). It's in the news once again this morning, and it looks like it's trading lower in the premarket, so not expecting a buy signal on Wednesday. We need to close above $4.26. That's not going to happen on Wednesday. So that upper channel line is going to continue to move lower. If we start breaking 3,13 and $3 then look for a move down to 1,56. That would be our next mathematical target. And of course $3, $2, both possible areas of psychological support on the way down, but 1,56 would be our next target, if we take out that recent low.
Okay, folks, that is all for this morning's presentation. Have a great day. The next time you'll hear my voice is on Sunday, and at that time we'll take a look at protecting your portfolio.