A big question swirling around Bay Street is: "Should one buy TD stock while it’s below $75?" In today’s SIA Daily Stock Report, this question will be addressed from a technical perspective. While SIA is known for its powerful tools that identify strong relative strength positions, the SIA platform serves two key purposes for elite advisors. While many focus on improving rates of return for their clients, the platform does so primarily by reducing risk. A significant part of this process is determining what assets to consider, as the wrong choices can often undermine the hard work accumulated throughout the year. Let’s use TD Bank and CIBC Bank to illustrate this distinction and show how the SIA relative strength ranking can assist advisors in identifying situations before they become lingering issues. Earlier this year, nearly the entire financial industry began to rally together, from insurance companies and brokerage houses to both traditional and non-traditional fintech operations. This broad-based rally started with a few large US companies and spread globally, including Europe, Canada, Australia, and Asia. While TD Bank is well-regarded, the company's shares continue to underperform the market. This is illustrated in the SIA matrix position chart above, which shows the stock moving down the relative strength ranks since January 2022, making it unfavorable to consider based on SIA’s rules-based methodology. Next, consider the point-and-figure chart for TD, where the SIA matrix position overlay tool has been applied. A red oval highlights the period of underperformance from a relative perspective. Additionally, two arrows indicate that TD shares have put in a lower high last month, while the rest of the sector is showing gains, with TD shares remaining stagnant. For those considering a potential recovery in TD, support and resistance lines have been added, initially at $81.51, $86.50, and $95.50. Support levels are at $70.96, $61.77, and, regrettably, all the way down at $50. Therefore, tighter stop-loss orders should be respected for those willing to take a risk, but it’s important to note that the risk-reward ratio is unfavorable. This is also reflected in the SMAX score of 3, a near-term indicator of relative strength, showing TD’s poor relative strength against its peer group on the various SIA Reports.
Turning now to CIBC Bank (CM.TO), the situation is quite the opposite. CIBC shares are highly ranked within the SIA platform, currently sitting in the #11 position within the SIA S&P/TSX 60 Index Report. In the attached point-and-figure chart, the upward movement in relative strength is visible, with color coding provided by the SIA Matrix Position overlay tool. The shares have moved from Unfavored (red) to Neutral (yellow) and finally to Favored (green) throughout 2024. In doing so, CIBC broke through resistance at $65 and $72, with current pricing at the $93 level. This has resulted in a YTD return of 52.23%, with 17.15% of that coming in the last quarter as the stock entered the SIA Favored zone.
By comparison the SIA S&P/TSX 60 Equal Weight Index benchmark is up 18.46% YTD and 6.33% for the past quarter. With the point-and-figure chart now showing strong upward momentum, the next resistance levels are at $107.87 and $116.87, with support initially at the 3-box reversal level of $85.84, followed by $71.24 and $64.52. The SMAX score of 10 out of a possible 10 further strengthens its position, indicating better risk-reward prospects overall. This, combined with its high rank across all SIA reports, suggests a more favorable investment profile. At SIA, the approach is clear: we prefer top-performing assets in favor of underperforming ones, especially on a relative basis. In fact, the preference is to buy more of the winners and sell the laggards. So while the initial question posed will not be directly answered, all the tools and analysis have been provided to make an informed decision, based on the probabilities revealed through this risk-reward analysis.
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.
