[Canada] REITs For The Sky

From the desk of Tom Bruni @BruniCharting

Last week I wrote about the Canada's Energy markets to introduce our new Canadian Chartbooks (Major Sectors & Indices and TSX 60). In today's post I want to focus on the Banking and REIT sectors, which are showing relative strength and continue to offer opportunity on the long side. Not to mention I've been itching to use this Toy Story pun as a title since JC hired me.

First let's take a look at the TSX Capped REITs Index vs the TSX Capped Composite. It's spent the last 2 years bottoming and is now breaking out above a confluence of resistance. If this ratio is above it, the bias is to the upside with a target at the '15-'16 highs.

Click on chart to enlarge view.

Below is a weekly chart of the TSX Capped REITs Index on an absolute basis. It's been basing for 6-year base and is attempting to close above 176.50 to confirm a breakout that would target 203.65.

The TSX Capped Real Estate Index vs TSX Capped Composite looks similar in that it's breaking out of a 2-year base. As long as this ratio is above its '17 highs, the bias remains higher with a target at the '15-'16 highs.

The TSX Capped Real Estate Index broke out in May and has been grinding higher since. As long as prices are above 306, we want to be buying weakness and taking profits near 341.60.

The Equal-Weight TSX Diversified Banks Index vs Equal-Weight TSX Composite ratio is also attempting to make new highs, showing broad-based strength in Canadian Banks.

The Equal-Weight TSX Diversified Banks Index is also attempting to make new all-time highs on an absolute basis. We want to be buying a move above 352, with an upside target near 400.

The TSX Capped Financials Index is also just a few percentage points off all-time highs, so we can be long that as well if prices are above 298, with a target of 353.50.

Royal Bank of Canada is a great example of a Bank stock we want to own. As long as prices are above 102.25, the bias remains to the upside and targets 115 over the intermediate-term. Ideally we'd like to see this breakout accelerate and momentum get into overbought conditions.

Colliers International Group Inc. is a great example of a Real Estate Index component that's showing relative strength. Prices exceeded our price objective of 102.70, retested that level, and are now continuing higher. If prices remain above 102.70, we want to be long with an upside price target of 139.50.