The TSX 40 index has been in a tight range in the past few months. It was trading at C$20,540, where it has been at since April 18 of this year. This price is about 7% above the lowest level this year, meaning it has underperformed other key global indices like the Nasdaq 100 and Topix indices.
Commodity prices lag
The TSX 40 is a blue-chip index that is made up of the biggest companies in the country. The biggest companies in the index are Royal Bank of Canada, Toronto-Dominion Bank, Canadian National Railway, Shopify, Enbridge, and Canadian Pacific Railway among others.
Most of the companies in the industry are in the commodity sector since Canada is well-known for key commodities like oil and gas, silver, and copper among others. Most of these commodities have dropped sharply this year. Crude oil price has dropped by over 14% this year while natural gas is sitting at the lowest level since 2021. The Bloomberg Commodity Index has dropped by more than 24% from the highest point in June last year.
The best-performing TSX constituent is Shopify, whose stock has jumped by 76% this year. This rebound is happening as the company’s growth rebounds. Bellus Health, Equinox Gold, Blackberry, and Dundee Precious Metals shares have jumped by over 50% this year. Gold and silver stocks have jumped this year, helped by the soaring prices.
Other leading TSX constituents are Lundin Gold, Open Text, Eldorado Gold, and Alamos Gold among others.
On the other hand, the worst-performing stocks in the index are Canopy Growth, Precision Drilling, Vermillion Energy, Pason Systems, Baytex Energy, and Altus Group. All these shares have crashed by more than 30% this year.
The next catalyst for the TSX index will be the upcoming Canada consumer price index (CPI) data. Economists expect the data to show that the headline CPI dropped to 4.1% in April.
TSX 40 index forecast
TSX 40 chart by TradingView
The TSX 40 index has risen in the past few weeks. It has moved slightly below the key resistance point at C$20,760, where it has struggled to move above the key point on February 6. It remains slightly above the 25-day and 50-day exponential moving averages.
The index has moved above the 61.8% Fibonacci Retracement point. Further, the Relative Strength Index (RSI) has drifted upwards. Therefore, the outlook of this index is neutral until it moves above the resistance point at $20,760. A move above this level will see it rise to the key resistance point at $21,300, the 78.6% retracement point.
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