Over the past several weeks, we have focused on significant sector and stock rotations highlighted in the SIA Reports, as well as major trades emerging from the SIA Hypo Models. We hope these insights provide valuable takeaways for SIA practitioners as they prepare for the critical fall market sessions. Despite the summer doldrums, our team at SIACharts has been diligently stress-testing our models using our advanced AI platform and refining our proven systems. We have also concluded the summer session of SIA Summer School and want to commend all the advisors who recognized the potential of powerful technology for their clients. Advisors, both new and seasoned, from across the country took advantage of this time to learn and grow. Their efforts are already yielding benefits as volatility returns to the market. Today's Daily Stock Report features Dollar Tree. While not a position in the SIA Hypo Models, it offers a glimpse into what might happen with our current favorite, Dollarama. This report serves as a teaser to honor our new students and to encourage advisors who are considering adopting the SIA Relative Strength Methodology. Our last review of Dollar Tree Inc. (DLTR) on August 29, 2022, showed a Relative Strength warning as the shares exited the Favored Green Zone of the SIA NASDAQ 100 Index Report, as highlighted on the attached SIA Matrix Position chart. Since then, the shares have continued to lose momentum, dropping to last place in the report. This decline, following the loss of relative strength, resulted in the stock breaking through multiple layers of solid support (now resistance). Shares are now trading around $65, erasing gains accumulated over more than four years. This 53% decline could have been avoided. Our rules-based system, which minimizes emotional investment decisions, suggested looking elsewhere. Dollarama Inc., quickly becoming a favorite among bargain retailers, presented a compelling alternative. Dollar Tree, now in position #99, shows no relative strength compared to other stocks in the SIA NASDAQ Index Report and maintains a Negative (RED) SMAX of 0, indicating it lacks relative strength against all other asset classes.
To illustrate this Relative Strength disparity, we have included a point-and-figure (P&F) comparison chart of Dollarama versus Dollar Tree. The chart highlights the opportunity cost of holding Dollar Tree, showing how Dollarama advanced through its SIA Relative Strength Matrix in the SIA S&P TSX 60 Index Report. As Dollar Tree declined in its SIA Report, Dollarama was moving into the Favored (Green) category. The lesson is clear: relative strength matters. To outperform the market and add value for your clients, focusing on relative strength is essential, best achieved through a top-down approach (Asset Classes → Sectors → Stocks). If you’d like to brush up on these techniques to enhance your portfolio, please reach out to one of your SIA Agents. We are always happy to assist. Stay tuned for our review of Dollarama later this week, where we will examine the DOL.TO position to ensure we protect the 55% return already achieved on DOL.TO in the SIA Hypothetical CAD 5-Stock Model.
Disclaimer: SIACharts Inc. specifically represents that it does not give investment advice or advocate the purchase or sale of any security or investment whatsoever. This information has been prepared without regard to any particular investors investment objectives, financial situation, and needs. None of the information contained in this document constitutes an offer to sell or the solicitation of an offer to buy any security or other investment or an offer to provide investment services of any kind. As such, advisors and their clients should not act on any recommendation (express or implied) or information in this report without obtaining specific advice in relation to their accounts and should not rely on information herein as the primary basis for their investment decisions. Information contained herein is based on data obtained from recognized statistical services, issuer reports or communications, or other sources, believed to be reliable. SIACharts Inc. nor its third party content providers make any representations or warranties or take any responsibility as to the accuracy or completeness of any recommendation or information contained herein and shall not be liable for any errors, inaccuracies or delays in content, or for any actions taken in reliance thereon. Any statements nonfactual in nature constitute only current opinions, which are subject to change without notice.
