Canada’s tech stocks are reaccelerating, Canaccord Genuity says

Look for equity markets to rally into July, says analyst Javed Mirza with Canaccord Genuity, whose technical comment on Monday calls for weakening in bank stocks like Bank of Montreal and Royal Bank, while predicting tailwinds for Canada’s tech stocks such as OpenText (Open Text Stock Quote, Chart, News: TSX:OTEX) and CGI Group (CGI Group Stock Quote, Chart, News: TSX:GIB.A).

Mirza points out that the S&P 500, Nasdaq 100, TSX Composite and Russell 2000 are all above their 50- and 200-day moving averages, a strong technical positive that suggests that markets are now pushing out of a choppy short-term corrective phase and confirming that short- and intermediate-term trends are up.

“The S&P 500 appears poised to trigger a new weekly ‘mechanical buy’ signal,” says Mirza. “This would be a strong technical positive and support a retest of the January highs.”

Over the long-term, the analyst is viewing weakness as an opportunity to add exposure to the ongoing secular bull market.

An analysis of the TSX Composite by sector suggests that Telcos, Utilities, Financials and Energy are all showing signs of weakening relative performance compared to the TSX Composite.

Montreal-based CGI Group saw its stock hit an all-time high last Friday, closing at $80.04. Mirza says that CGI’s on-balance volume is showing signs of buying pressure, which is a technical positive. “GIB.A is trading above the 50/200-day moving averages, confirming that short- and intermediate-term trends are up, a strong technical positive,” he says.

For OpenText, its relative performance versus the TSX Composite is reaccelerating, seen as a technical positive, while the stock has just triggered a new daily “mechanical buy” signal, another technical positive.

As a whole, Mirza says that the Information Technology sector recently triggered a new weekly “mechanical buy” signal while the sector is also seen to be reaccelerating in performance relative to the TSX Composite, both technical positives.