Shares of Manulife Financial Corp. (MFC.TO) have been steadily dropping within the ranks of the SIA S&P/TSX 60 Index Report after being favored for over a year, as shown in the attached SIA matrix position chart. The stock is currently in position 26 in the report and entered the neutral zone in mid June. While shares have not declined, they are showing their first round of relative underperformance. This marks a red flag for skilled SIA practitioners. The development stands out given that the insurance sector has also shifted into unfavored territory within the SIA Sector Report. This sector had been among the favored ones over the past several years.
The weekly candlestick chart shows a black line that represented the growth trajectory beginning when shares moved beyond prior consolidation in the low $20 range in 2023. Shares doubled over the following two years, generating strong returns. Share price began topping out in late 2024, with repeated failure to break above the $45 level. This is illustrated with the red resistance line on the chart. The break of the black intermediate trend line followed by a retest from below, again failing to surpass supply at $45, reinforces the loss of momentum. A sharp decline in volume is visible, highlighted by a downslope line on the weekly chart where each bar represents one week of trading.
The SIA point and figure chart, scaled at 1% and overlaid with the SIA matrix position data, visually captures the weakening relative strength now emerging in the trading pattern. Despite little change in share price, the absence of relative strength raises concern. MFC.TO may be vulnerable in the event of a market pullback, as it appears to be entering the category of market underperformers. The move into the yellow neutral zone is marked with a yellow oval, contrasting sharply with the green zone breakout in early 2024 when shares moved above $25. Current point and figure resistance levels might continue at $44.23 and $46.03 while support levels are indicated at $37.72 and further down at $31.85.
Despite these developments, shares of Manulife Financial Corp. hold a near perfect SMAX score of 9 out of 10. This is a short-term measure of relative strength versus a basket of alternative asset classes. The tone of this daily stock report reflects a risk-adjusted view of technical data within the context of declining SIA Insurance sector metrics and an elevated risk profile. MFC.TO remains a holding in the SIA Hypothetical Canadian 5 Stock model, contributing a 38% gain in a model that is up 23.47% YTD with a 14.15% compound annual growth rate since inception on February 2, 2007. All model trades are sent to SIA subscribers as they occur. With MFC.TO now in the neutral zone, a drop in SMAX to 5 or below or continued decline into the red unfavored zone would meet the criteria for a rules-based sell under the SIA methodology.
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