Bank of Nova Scotia - (BNS.TO) - November 23, 2023

Canadian banks report results next week for the quarter and fiscal year that ended on October 31st. It has been a choppy time for the sector as all Big Six banks are down from a year ago but up from a month ago. All six banks have bearish SMAX scores, indicating the group is underperforming relative to the asset classes.

SIA Charts relative strength analysis tools not only help investors to avoid stocks with weakening relative strength and at risk of short-term losses, but also to identify stocks with the potential to underperform over the longer term.

Bank of Nova Scotia (BNS.TO) is currently the lowest ranked of the Big Six in the SIA S&P/TSX 60 Index Report, and is currently sitting in 56th place near the bottom of the Red Unfavored Zone. National Bank (NA.TO) is the only big Canadian bank that is not in the red zone, currently in 30th place at the bottom of the Yellow Neutral Zone.

Bank of Nova Scotia last peeked up into the green zone back in March of 2022. Since it fell out on March 8, 2022, BNS.TO has fallen 34.7%. In contrast, the S&P/TSX 60 Index is down 5.6% over the same period. For the last 21/2 years, Bank of Nova Scotia (BNS.TO) shares have been under distribution, declining in a downtrend of consistently lower highs. Last month, the shares broken down again, taking out $58.00 to complete a bearish Descending Triangle pattern and signal the start of a new downleg after spending most of this year drifting around $63.00.

This month, support came in near $55.00 and the shares have bounced back, possibly forming a small reverse head and shoulders bottom, but so far the bounce has been contained by a long-term downtrend line which remains intact.

A close above $62.50 would snap the downtrend and signal the start of a new recovery trend where previous highs suggest potential resistance near $66.00 then $70.00 and $75.00. On a downturn, initial support may appear near $58.00 or $55.00. If those fail, the door could be open to a potential test of the $50.00 round number.

Heading into next week’s earnings report, Bank of Nova Scotia (BNS.TO) shares may be near a technical inflection point. Since peaking in February of 2022, the shares have been under distribution, steadily declining in a downtrend of lower highs and underperforming the markets. Last month, BNS.TO staged a bearish Spread Quadruple Bottom breakdown which signaled the start of a new downleg.

That decline was contained by a 45-degree support line, however, and the shares have staged a 4-box reversal this month, generating a bullish Low Pole Warning. To completely call off the Spread Quadruple Bottom, the shares need to close above their September high near $64.49 which would generate a pending double top signal. Such a move would also snap a downtrend line and signal the start of a new uptrend. Should that occur, previous column highs suggest potential upside resistance tests may appear near $69.80 or $75.55.

Initial support appears in the $55.05 to $56.15 area where a recent low, a 3-box reversal and an uptrend line cluster. Should that be taken out, next downside support appears near $51.85 then $46.95.

With a bearish SMAX score of 2, BNS.TO is exhibiting weakness across the asset classes.