YOU COULD MISS RALLY IN TSX ENERGY, MATERIALS SECTOR IF YOU SELL IN MAY

If you plan to sell in May and go away this year, you might miss a nice rally in the TSX’S energy and materials sectors, says one analyst.

Sid Mokhtari, technical analyst with CIBC World Markets, said in a research note that technical data shows the S&P/TSX Composite has gotten most of its spring selling out of the way already.

"We believe that the old saying ‘sell in May and go away’ should prove wrong for the TSX,” he said. "In our opinion, most of the selling in Canada is already behind us.”

Mr. Mokhtari said that both the energy and material sectors, which account for roughly 45% of the TSX’S weighting, should be the front runners.

The outlook isn’t so picturesque for another big component of the TSX — financial stocks. Mr. Mokhtari’s analysis suggests banks and insurers will likely remain rangebound at best. If there is a plus side, however, it’s that financials should have a shallower correction if markets do end up selling off in May.

For those investors still set on going away this month, Mr. Mokhtari does acknowledge that historically, the TSX has in fact tended to post dips in May. "The data back-test confirms the general consensus on poor seasonality,” he said.

Mr. Mokhtari, however, warns investors about the risks of falling into patterns.

"The more investors subscribe to this philosophy, the less effective it becomes (investors tend to be prepositioned ahead of the news/season for the outcome probability).”

Community Talk

Re: YOU COULD MISS RALLY IN TSX ENERGY, MATERIALS ...

I hope your right Stargazer. I'm holding 3 OIL/NG stocks as well as  Uranium and Lithium. My focus for the summer remains  in hope of increased demand  for energy and of course  successful implementation of  certain benchmarks for the companies I own.