SIA Charts’ relative strength rankings help investors manage risk by identifying stocks and sectors which are underperforming relative to their peers and/or their benchmarks and should potentially be avoided. Staying away from stocks that are not attracting capital can help investors to avoid areas at higher risk of absolute declines and relative underperformance and to reduce negative event risk.
Insurer Sun Life (SLF.TO) has spent nearly all of the last five years outside of the green zone in the SIA S&P/TSX 60 Index Report. From October of 2022 to March of 2024 it slowly clawed its way up the rankings and approached the boundary of the green zone before falling apart and falling back down the rankings over the last few weeks.
On Friday Sun Life returned to the Red Unfavored Zone for the first time in a year after dropping 6 spots to 34th place.
Sun Life (SLF.TO) shares started the year off positively but after running into resistance near $75.00 in April, cracks had started to appear. A correction back toward $69.00 followed by a bounce suggested that a sideways consolidation range was emerging.
On Friday, the shares gapped down on a spike in volume following the release of the company’s latest earnings report, indicating a decisive bearish shift in sentiment. SLF.TO took out its 10-day moving average and broke down below $69.00 signaling the start of a new downtrend.
Based on previous highs and lows, downside support may appear near $66.00 or $61.00, with initial resistance dropping to the bottom of the gap near the $70.00 round number.
Although Sun Life (SLF.TO) has underperformed relative to its peers over the last five years, it has generally trended upward along with the market, it seems to just be a more mature, lower volatility, “value” type stock.
In recent weeks, however, SLF.TO has started to show signs of peaking. Back in April, a rally stopped short of $75.00 and since then, a new downtrend of lower highs has emerged. On Friday the shares staged a bearish Double Bottom breakdown, signaling the start of a new downswing.
Previous column highs and lows suggest potential downside support near $66.60, then $64.00, followed by $61.50 which is based on a horizontal count. Initial resistance on a bounce appears near $71.40 based on a 3-box reversal.
Sun Life’s SMAX score (which is a near-term 1 to 90-day indicator comparing an asset against different equal-weight asset classes) remains bullish at 6 out of 10, still exhibiting short-term strength across the asset classes, but it has dropped from 9 at the start of April and a drop of one more place would turn it bearish.
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