The Canadian Technician

Important Lessons On The RSI Help Us With The Dollar

The Canadian Dollar ($CDW) has been in a downtrend for a long time. Deep on the Canadian wish list is a stronger dollar so that things Canadians import from the US would finally get more reasonable.

Looking in on the chart for the Canadian Dollar, we see a break on the chart. However, the chart of the Dollar has a couple of clues on it that makes this breakout more likely to hold unlike the one in July 2014. 

Constance Brown did some great work on analyzing the RSI. Here is a link to the book I read, which had a great chapter directed to the RSI

You can see the period from July 2009 to August 2011 has a green line on the RSI. While the Canadian Dollar was rising, the RSI never dipped below 40.

The RSI holds a couple of great clues that hold true most of the time:

  • Bull market RSI readings stay above 40 and usually hit 70 or higher on weekly charts (Green line)
  • Bear market RSI readings stay below 65 and fall below 40 on weekly charts (Red line)

The next period on the chart starts with an RSI dropping below 40 and bear markets tend to have RSI's under 65 and down to 30 or lower. When it breaks to the low thirties, that gives a strong bear market signal. Notice how timely the signal was as a clue of a new bear market in the Canadian Dollar back in October 2011 only 3 months after the highs. The bear market runs from October 2011 to the second quarter of 2016. Then we see the RSI pushes up near 70 warning of a change in trend. Now the RSI dipped down to 40 and bounced at the bull market level. I would interpret this as bullish for the Canadian Dollar and trade with that bias.

Looking at price, we see the 40 WMA has been resistance throughout the bear market. There is divergence on the 2015 low with the RSI making higher lows. The MACD also has the divergence confirming the potential for the change in trend.

Now the RSI is pushing higher. We should assume the bull market might be underway. With the trend line break, this looks more likely. The MACD stayed below zero for the most of the bull market. After rising above zero and pulling back just under zero, it now looks to be turning up in the next leg of the bull market. 

This chart looks a lot like the recent commodity low in precious metals and industrial metals. Usually, Canada's currency moves in line with the major commodities. This RSI clue could be the biggest clue for not only Canadian investors but commodity investors in general. 

Learning to read the clues on the RSI has been a big help in my understanding of the signals. This works great on weekly charts but on daily charts it gives smaller clues of pullbacks in uptrends. Working that together sounds easy but it is hard with all the little pulses that don't make sense or whipsaws. I have found the weekly charts help me to change from bearish to bullish and vice versa. However, the chart in $GOLD recently went all the way to the 30 level, suggesting the bear market in Commodities is not over. Now look back at the top in Gold and we did not get a bear market signal until much later. The bear market signal finally kicks in during the spring of 2013, well after the highs. But notice the RSI broke down before the price broke down through the $1550 support level. That is helpful information.

Currency traders typically use more leverage. They are pretty smart traders and adapt quickly on trend changes due to this leverage. Currently, we have a difference in opinion between the two. On the Commodity Countdown Webinar on Thursday February 2nd, 2017,  I will try to work through the charts using this RSI tool to help us gather the weight of the evidence. Sometimes the clues don't show up as obvious, but when you get these trend line breakouts, they can be another clue to help you get the direction right.

Martin Pring gave a fantastic webinar on Tuesday afternoon. Market Roundup Live 20170131. Timely clues can really help investors keep more of the major trends. Martin delivered that information in spades today for our members. If you are a member of, this is a 'do not miss' recording.

If you sign up for a 10 day free trial, you can try all these features and listen in on Martin's webinar. There are so many hidden features in, you really do have to take the free trial to see all the expert analysis tools that are made available to help you make money in the markets. These tools are helping you find strong stocks in strong industry groups early in the new trend. Click here to sign up for a 10 day free trial and use the coupon code BESTCHARTS to get your first month at half price.

Good trading,
Greg Schnell, CMT, MFTA.


Industrial Metals Lead The Pack -Webinar Skim 2017-01-24

The industrial metals stocks have ratcheted their way to the top of the SCTR rankings. They appear to be continuing to accelerate. The Capped Materials ETF (XMA.TO) in Canada broke out to 3-month highs Tuesday. The Relative Strength Ratio in purple is just about at 3-month highs as well.

The MACD has surged into positive territory after spending 4 months below the zero line. This group has room to run and this chart has some resistance 10% higher than this level.

Continue reading "Industrial Metals Lead The Pack -Webinar Skim 2017-01-24" »

Canadian Exploration Companies Current Rankings - Ouch!

The Canadian Oil and Gas Exploration stocks have fallen off the luster list. With only 17 of them above 75% (top Quartile) on the SCTR ranking, it is pretty dismal. This list only looks at TSX listings, above $1. This list is sorted based on the StockCharts Technical Ranking (SCTR) which ranks a stocks price movement compared to everything on the $TSX over the last 200 trading days. A stock with an SCTR of 80% is performing better than 80% of the stocks in the $TSX. I have also set the % Change indicator to one month. As you can see, even though oil is holding up around $50, these stocks are falling away for the most part. Natural Gas has also drifted back from the highs but Encana is holding up well.

Continue reading "Canadian Exploration Companies Current Rankings - Ouch!" »

$TSX Continues To Drift Back From The Highs - StockCharts Ratio Charts

Two weeks ago, the $TSX made a big push up to new 52 week highs. The intraday high was 15621. The candles around the high have some interesting traits that should be noted as this might mark a more meaningful top for the next few weeks or months. The market surged above the previous levels of 15400 shown with a red line. The original breakout day saw the $TSX close near the highs of the candle. The final high candle I am referring to has an orange arrow next to it. We can see it pushed higher and closed in the middle of the range which is perfectly normal. The next day, the market fell away all day, and the same on the following day. This makes the high look unsupported as the market quickly retreated from those levels. While a fundamental analyst might place little weight on this particular group of candles, more information makes this failure to hold the highs significant.

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Auto Stocks Are Breaking Out Of Bases

The auto sector has been slowly climbing a wall of worry. Donald Trump adding his 140 characters has made everyone look at the auto charts the last few days! But more importantly, the investors are already rolling on these wheels.

First of all, the auto sector was one of the worst performing sectors last year. In a big up year (2016) for the markets, the car guys were not being bought. Here is a look across the worst performing industry groups in the US markets. The Autos were down 4.56% in the '% change' column. Automobile parts (-1.71%) and tires (-5.75%) were also in the "poor performers" industry list in 2016.

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Saputo Starts To Solidify (SAP.TO)

There has been some rotation into more defensive stocks this week, so I thought I would highlight Saputo this week. The chart looks set to deliver more solid gains. Saputo has a big uptrend going, but recently pulled back for about 6 weeks. When investors jumped into Financials in November, they were selling Saputo by looking at the chart. Friday price action is interesting. It gapped open, shot up, then traded near the lows to close out the week. All of the other indicators are giving positive signals. The MACD is turning up, the SCTR is pushing back above 75, the volume doubled on the breakout, and the relative strength downtrend apeears to be breaking. 

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Canadian Stocks Wiggle Uncomfortably - Webinar Skim 2016-12-13

Well, another year of Fed meetings and another December 0.25% rate increase with predictions for a more aggressive pace next year. So in a day where we got what we expected why did the market wobble this time? At the last Fed meeting (October), we got what we expected and it marked the November low in the markets and the US Dollar.

Continue reading "Canadian Stocks Wiggle Uncomfortably - Webinar Skim 2016-12-13" »