Javed Mirza, analyst, Canaccord Genuity

FOCUS: Technical analysis

Javed Mirza is a technical analyst and not a portfolio manager. The stocks referenced here are ones he is monitoring closely.

MARKET OUTLOOK:

We are seeing a new intermediate-term (two- to four-month) rally phase attempting to take hold in most major North American equity markets. This rally phase is within the context of a new four-year cycle (cyclical bull market). Most major North American equity indices remain above a key technical level at their 40-week (~200-day) moving average, confirming the intermediate-term trend is up. Ongoing leadership by materials, industrials and financials would be consistent with both rates and inflation remaining higher for longer than most market participants anticipate.

In our short-term view, between two to four weeks, new daily “mechanical buy” signals would be supportive of a short-term (two- to four-week) rally phase developing in equity markets.

Improving price momentum on most major North American equity indices supports new daily “mechanical buy” signals being triggered.

From a contrarian perspective in our intermediate-term view, between two and four months, investor sentiment and the CBOE put/call ratio, are showing signs of fear. This is supportive of a new intermediate-term (two- to four-month) equity market rally phase taking hold. In conjunction with improving market breadth, these technical indicators suggest the worst case scenario is underway for most investors. Including another equity market upleg that we believe has upside into May (see our recent note, corrective phase an opportunity to add equity exposure as worst-case scenario looms, Feb. 13, 2023).

• Sign up for the Market Call Top Picks newsletter at bnnbloomberg.ca/subscribe
• Listen to the Market Call podcast on iHeart, or wherever you get your podcasts

TOP PICKS:

During today’s program, we’ll highlight actionable stock ideas which are components of our favoured sectors for the HFL cycle financials (NA), materials (WFG) and industrials (STN).

 The recent corrective phase in equity markets that began on Feb. 1, 2023, saw further rotation out of the more defensive areas of the market, namely consumer staples, utilities, and healthcare. The beneficiaries of this rotation remain the HFL plays, notably Industrials, materials, and financials. This new HFL four-year cycle should see a transition in leadership from the names that led the 2018-22 four-year cycle, such as the Goliaths (mega-cap information technology).

National Bank of Canada (NA TSX)

West Fraser Timber (WFG TSX)

Stantec (STN TSX)

PAST PICKS: January 5, 2023

Osisko gold royalties (OR TSX)

• Then: $17.15
• Now: $17.84
• Return: 4%
• Total Return: 4%

Lundin Mining (LUN TSX)

• Then: $8.69
• Now: $8.39
• Return: -3%
• Total Return: -3%

Air Canada (AC TSX)

• Then: $20.12
• Now: $20.57
• Return: 2%
• Total Return: 2%

Total Return Average: 1%