Keith Richards, portfolio manager at ValueTrend Wealth Management of Worldsource Securities

Focus: Technical analysis
_______________________________________________________________

MARKET OUTLOOK
Virtually every seasonal statistic you can look at will show the tendency for markets to rally into the New Year — with a finishing bump into the first week or so of January via the “Santa Rally.” The second half of January into late February can be a bit of a yo-yo under normal conditions. However, on top of the seasonal tendencies, we have another cycle coming into play this January. The presidential inauguration takes place on January 20th. Markets often remain strong into that date from an historic viewpoint.

Putting it all together, it is my opinion that markets will continue to rally until somewhere between the Santa Rally and inauguration day. Sentiment indicators like smart/dumb money — which are getting quite overbought (i.e. too much optimism) at this time — may reach their optimistic sell points somewhere in that period. Here is a blog with a few of the sentiment charts I follow: http://www.valuetrend.ca/many-happy-investors.

It would not surprise me if markets reach a short-term peak near or before inauguration day — and possibly sell off a bit or trade in a choppy range into late January and February. Should you feel that there is a potential for this scenario to unfold, it might be an opportunity to sell your questionable stocks into the early part of January. From there, look to rotate into more favorable positions as buying conditions present themselves.

TOP PICKS

RIO TINTO (RIO.N)
Rio Tinto is a mining company. Copper, one of its key products, comes into play from a seasonal perspective from now until April. Technically, Rio Tinto, and copper, seem to have put in a nice base breakout recently. RIO broke its neckline at around $35 after the Trump election — although the setup for a breakout was building long before the election date. We took a position at just over $38 recently, and expect to sell in the spring at or near $50.

CP RAIL (CP.TO)
CP Rail seems to be setting up for a nice move. The stock has underperformed its counterpart CNR, but broke its downtrend in the fall. It's slowly climbing out of a base — which can be a good sign, from a technical perspective. This stock should perform well into the spring, along with other transportation stocks. We do not have a clear target to sell CP at this time — instead, we will assess our sell point as the stock price dictates.

JOHNSON CONTROLS (JCI.N)
Johnson sells fire, safety and auto products. There is seasonal influence on this stock by the auto and industrial sectors. The stock broke out of a lid that contained it since 2014 at around $42 — and recently came back to test that breakout point. Technically, if the stock can stay at or above $42, we should see a move into the spring.
 

PAST PICKS: NOVEMBER 14, 2016

PARKLAND FUEL (PKI.TO)

• Then: $27.01
• Now: $28.13
• Return: +4.14%
• TR: +4.85%

BCE (BCE.TO)

• Then: $56.95
• Now: $58.03
• Return: +1.89%
• TR: +3.09%

AMAZON (AMZN.O)

• Then: $719.07
• Now: $749.87
• Return: +4.28%
• TR: +4.28%

TOTAL RETURN AVERAGE: +4.07%
 

TWITTER: @ValueTrend
WEBSITE: www.valuetrend.ca