National Bank of Canada - (NA.TO) - November 29, 2023

Although it remains the highest ranked of the Canadian banks within the SIA S&P/TSX 60 Index Report, National Bank of Canada (NA.TO) has been weakening relative to stocks in other sectors since March, when sentiment turned against banks in the wake of multiple regional bank failures in the US. This week, NA.TO has dropped into the Red Unfavored Zone for the first time since May of 2020. Not even the recent dropoff in treasury yields, which ignited the recent broader market rally, has helped the banks on a relative basis. Earnings week for banks finds the entire group now in the Red Unfavored Zone. Bank of Nova Scotia (BNS.TO), who we highlighted in the November 24th edition of the Daily Stock Report released worse than expected results primarily due to a jump in loan loss provisions (money put aside to cover bad debts).

One of the reasons National Bank had outperformed its immediate peers in recent months was its focus on domestic rather than US or overseas banking, but Scotiabank’s results indicated that Canadian banking struggled as well. National reports results on Friday, tomorrow’s numbers from RBC, TD and CIBC may shed more light on the health of the Canadian banking market.

Back in August, a year-long uptrend in National Bank of Canada (NA.TO) shares came to an end when the shares snapped a support line and completed a bearish Rising Wedge pattern. The shares then sold off for two months and recently have been consolidating their losses.

A recent bounce up off a higher low near $85.00 (which has become initial support) looked encouraging at first, but that has started to fade. This month, the shares have established a lower high near $91.00 (which has become initial resistance, and have started to backslide, falling back under $90.00, a key round number in the middle of a $78.00 to $102.00 trading range which has flipped back and forth between being support and resistance.

Yesterday, NA.TO broke down below its 50-day moving average again to signal the start of a new downswing.

Next support below $85.00 appears at the range bottom near $78.00. Next potential resistance above $91.00 appears at the 200-day moving average near $95.00.

Heading into Friday’s earnings report, National Bank of Canada (NA.TO) appear to be near a potential technical turning point. While the banking sector in the US peaked back in March, NA.TO shares continued to trend upward through to August.

Since peaking in the summer, NA.TO has turned downward, completing bearish Double Bottom and Spread Double Bottom breakdowns in a selloff that continued into November. Recently, the shares staged a 3-box reversal up off of a higher low but it remains to be seen if this is a trading bounce or the start of a more significant turnaround.

A close above $94.55 would trigger a bullish pending low pole warning. Upside resistance appears at previous highs near $96.40 and $104.35, around the $100.00 round number. Initial downside support appears at the recent low near $83.95, followed by the July 2022 low near $77.55.

With a bearish SMAX score of 3, NA.TO is exhibiting weakness across the asset classes.