3 Canadian Stock’s We’re Not Buying In June

(Video length 00:11:15)

Hey everyone, and welcome to another video (or article).

Today, we’re going to look at a few Canadian stocks that  investors might want to avoid considering the current market conditions.

And what we mean by current market conditions is that the TSX Index has officially entered overbought territory. This means that the markets in general may be due for a short term pull back after such a great month of May.

Here at Stocktrades, we are firm believers that investors should never try and time the market. We believe that time in the market beats time out of the market.

That being said, there are also times when investors can pick their entry points

This is why we are big fans of what is called the 14 day relative strength index, or 14 day RSI for short.

This is a short term momentum indicator that highlights whether or not the stock or market is in oversold or overbought territory.

When an asset has an RSI of 30 or below, it is a sign that the stock is oversold, or due for a short term bounce.

The opposite is also true, when an asset has an RSI of over 70, it means the stock is overbought, and due for a short term correction.

So in my personal opinion, when I am researching a stock and want to start a position, where it be a growth stock or Canadian dividend stock, I always check the 14 day RSI. If it’s above 70, I’ll stay away. I will wait until the position consolidates or perhaps corrects, at which point in time I”ll buy the stock.

The 14 day RSI is simply a momentum indicator, it has nothing to do with fundamentals. Granted, an RSI below 30 may be a sign that the company’s fundamentals are deteriorating and the stock is being sold off. So keep an eye on this.

I am typically very comfortable picking up a stock anywhere from 30-70.

I mentioned that the TSX has entered overbought territory. As of filming, it has a 14 day RSI of 72. This is the highest it has been since late February, right before the latest market crash.

Given this, investors should be extra cautious when they start investing in this type of frothy environment, and maybe stick to blue-chip Canadian stocks if they’re unsure.

Now, along with the TSX index, there are several stocks that are now in overbought territory.

Investors want to be very careful before entering a position. Is a stock you’re considering in overbought territory? I have 3 for you that you might want to avoid.

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