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West Fraser Timber Co Ltd (WFG.TO) - February 12, 2024

SIACharts’ relative strength rankings help investors manage risk by identifying stocks and sectors which are underperforming relative to their peers and/or their benchmarks and should potentially be avoided. Staying away from stocks that are not attracting capital can help investors to avoid areas at higher risk of absolute declines and relative underperformance and to reduce negative event risk.

Deep cyclical groups in the Materials sector, such as forest products, have been struggling in the Canadian relative strength rankings for some time. In the January 10th edition of the Daily Stock Report, we featured Interfor, whose shares have declined by 19.8% since then.

West Fraser Timber (WFG.TO) shares fell out of the green zone in the SIA S&P/TSX Composite Index Report at the beginning of August and have been pretty much flat since then, while the S&P/TSX Composite Index has climbed 4.4% over the same period. In the last month, WFG.TO has lost 8.9%, while the benchmark index has lost 0.9%.

West Fraser continues to slide within the Yellow Neutral Zone of the SIA S&P/TSX Composite Index Report, dropping 26 spots over the last month to 103rd place.

Candlestick Chart Rolls Down Within a Trading Range:

Since the beginning of 2022, West Fraser (WFG.TO) shares have been trending sideways between $90.00 support and resistance in the $120.00 to $125.00 area. The latest upswing, which peaked about a month ago ran into resistance near the $115.00 level.

In recent weeks, the shares have been backsliding, taking out their 10-week moving average to signal the start of a new downswing. Initial downside resistance appears near the $100.00 round number, followed by channel support near $90.00.

Point and Figure Chart Goes into a Downswing:

Since the fall of 2022, West Fraser Timber (WFG.TO) shares have been stuck in a sideways trading range between $87.50 and $117.50. The shares from the bottom to the top of this range as equity markets rallied between October and January. Earlier this month, however, the shares failed to break out for a third time and have started to drop back, with a bearish High Pole Warning suggesting that bulls have lost strength and bears have gained the upper hand again.

A close below $96.75 support would complete a bearish pending double bottom breakdown with next potential support after that at previous lows near $93.00, or the October low near $87.65. Initial resistance appears near $113.40 based on a 3-box reversal.

With a bearish SMAX score (which is a near-term 1 to 90-day indicator comparing an asset against different equal-weight asset classes) of 3 out of 10, WFG.TO is exhibiting short-term weakness against the asset classes.

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