The Globe and Mail attempts to identify stocks with a downside risk of 10 per cent or more in its Friday edition. The Globe's guest columnists Ron Meisels and Monica Rizk write in the Number Cruncher column that they only considered companies in the S&P/TSX 60 Index. They looked at each stock's 40-week moving average (40wMA).
They believe stocks trading above their rising 40wMA
are the best candidates for investments. Those stocks are the ones that
show a bullish behaviour.
Mr. Meisels and Ms. Rizk note that when
stocks rise significantly above this average
(more than 10 per cent), investors
often use this as an opportunity
for taking profits, since this
usually leads to a price correction
toward the 40wMA. Mr. Meisels and Ms. Rizk focused on stocks that
are trading above their rising
40wMAs and therefore have further
upside potential, but are
currently trading 10 per cent or
more above this indicator. These
are the ones most likely to have a
pullback toward their respective
40wMA where they could provide
an ideal point for accumulation. Stocks with greater downside risk are Bank of Montreal, BlackBerry, Brookfield Asset Management, Metro, Saputo and Eldorado Gold.
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