A new short-term rally phase is underway, says analyst Javed Mirza of Canaccord Genuity, whose technical comment Sunday recommended adding info tech companies Constellation Software (TSX:CSU) and Shopify (TSX, NYSE:SHOP), along with railway and auto sector stocks.
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, confirming that short and intermediate-term trends are up.
“In our most recent note, we noted that short-term weakness would be the springboard for at least one more upleg by equity markets into July,” writes Mirza. “This short-term rally is now underway with upside by time into late July.”
By sector, Telcos and Utilities have both triggered new weekly “mechanical buy” signals, says the analyst, as price momentum in the two sectors is improving relative to the TSX Composite, while Industrials has triggered a new weekly “mechanical sell” signal, with momentum stalling versus the TSX Composite.
The analyst states that both Constellation and Shopify are seeing their technical profiles strengthen versus the TSX Composite, while price momentum and On-Balance-Volume are improving, both technical positives.
On a weekly basis, both CSU and SHOP remain on intermediate-term ‘mechanical buy’ signals, says Mirza, a technical positive, but upward momentum is slowing, an early technical negative.
“CSU is in an intermediate term uptrend and is trading above the 40/200-week moving averages, a strong technical positive,” says Mirza. “Major resistance is near $1,054.08. First support is near $1,024.56, then $969.62. Next upside technical target is near $1,100.”
“SHOP is trading above the 40-week moving average, a strong technical positive,” he says. “Major resistance is near $221.99. First support is near $191.43, then the 40-week, currently at $160.61. Important support is near $159.07.”
Over the long-term, Mirza says, “We view weakness as an opportunity to add exposure to the ongoing secular bull market.”