A Good-Looking Couple of Canadians

What do Wayne Gretzsky, Bret Hart, Pamela Anderson and Nortel Networks (NT Quote) have in common?

They're all Canadian natives that the U.S. has adopted as its own. And, after watching these four perform, do you really think anyone will blame us? I didn't think so. After all, Gretzsky is "The Great One," Bret Hart is "The Hit Man," Pamela Anderson is, quite simply, feminine pulchritude, and Nortel has been and remains bullish.

I thought it would be a good idea to focus on Canada this week, for a couple of reasons. First, I could never figure out why Canada, despite the fact that it is the bestest buddy the U.S. has, comes up less often in conversation than Mexico. Think about it: Has anyone ever said, "Don't drink the water," when you visit Canada?

Second, Standard & Poor's has teamed up with the Toronto Stock Exchange, or TSE, to create three indices that should make Canada a little more popular with investors. The three indices are the S&P/TSE 60, the S&P/TSE MidCap Index and the S&P/TSE Small Cap Index. The S&P/TSE 60 is going to be the new Canadian large-cap benchmark, and it will replace the current TSE 35 and TSE 100.

Third, isn't it about time we explode (explode is a little strong, but it sounds exciting, doesn't it?) the myth that Canada is a "natural resource" market? Sure, Canada is a huge land mass with great wealth in natural resources (i.e. gold, oil, timber, etc.), but as far as the Toronto Stock Exchange is concerned, the industrials, financials and utilities are far more important. Here's what I mean, looking at the respective weightings for the 14 groups that make up the TSE 300.

The Toronto Stock Exchange 300 Industry Weightings
Industry Group	Weighting in Index
Industrials	30.0%
Financial Services	14.7%
Utilities (primarily telecoms)	14.3%
Oil & Gas	8.6%
Communications & Media	7.2%
Consumer Products	4.0%
Metal & Mining	3.9%
Gold & Precious Metals	3.7%
Conglomerates	2.8%
Merchandising	2.6%
Paper & Forest Products	2.3%
Transport & Environmental Services	1.9%
Pipelines	1.8%
Real Estate	1.4%
Source: Toronto Stock Exchange

Even if we add up all of the natural resources sectors (oil, metals, gold, forest products and pipelines), the total is 20.3%, or just over one-fifth of the TSE 300. Meanwhile, the two heavyweights of Canada, Nortel and BCE (BCE Quote) (the old Bell Canada), combine to total nearly 26% of the capitalization weighting of the TSE 300 (Nortel is 15.44% of the TSE 300 and BCE is 10.47% of the TSE 300). Suffice it to say that the big boy up north is really just an extension of what is going on in the U.S.

I found more than a handful of nice patterns in Canada and I thought it would be a good idea to go over two that trade here -- the first on the Amex and the second on the Nasdaq.

Global Light Telecom (GBT Quote): According to my handy, dandy Bloomberg, Global Light Telecom closed at 13 1/2 on Friday, Dec. 17, 1999 on nearly 285,000 shares and, in the process, completed a nice 5 1/2-month base in which the stock traded between 8 and 13. Actually, GBT broke out of the base on Monday, Dec. 13, as it gapped upward on 932,000 shares -- or more than 8 times the 10-day moving average of volume.

So from Monday through Friday the stock consolidated, which is unusual these days given how upside gaps tend to move quickly, and is currently giving investors a chance to participate without really having to chase the stock. The favorable pattern setup -- consolidation/base building, completion of the base with an upside gap, the corresponding volume surge, and upward-sloping 50-day and 200-day moving averages -- suggests a target of 20.

Seeing the Light at 20

Imax (IMAX Quote): For me, Imax is a little tougher call than Global because Imax disappointed in early January 1999, and got whacked as a result.

Here's what happened: From mid-1997 through 1998 Imax put in a big consolidation/base-building phase in which the stock traded between roughly 20 and 30. On Dec. 31, 1998 the stock broke out above resistance at 30, suggesting a target of 40. It ran to 33 5/8 on Jan. 4 and consolidated for nearly three weeks of trading activity between 30 and 33 5/8 before failing abruptly on Jan. 25, closing at 25 51/64, or 20% lower than the close on Jan. 22. Imax continued to deteriorate following its blowup and bottomed on March 18 at 15.

Of course, since then, Imax has improved dramatically and deserves a second chance -- albeit with tight reins since the market has a long memory, and investors will no doubt remember the trouble it had in the 33 area. Be that as it may, the pattern is healthy as the stock is currently above 10 months' worth of basing/consolidation-type activity: The high during this time was 25 1/2 in August 1999, and the low is the aforementioned 15 from March 1999. The stock's upward-sloping 50- and 200-day moving averages are also bullish. Keeping in mind that the 33 area is likely to present some trouble, the completion of the 10-month base suggests a target of 35.

A Second Chance for Imax

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Roque Ruminates

Many thanks to everyone who politely answered the Qualcomm (QCOM Quote) question in my Nov. 29 column No Visible Means of Support. The information I received was invaluable: At least now I understand why others think the stock is so bullish.

Also, a great thank you to Dave Salveson who sent me the nicest email I have yet received while writing for TheStreet.com. Thanks for remembering the Oct. 6 column Enterprise Software Is the Group to Watch, which performed like clockwork, and for not remembering the Aug. 30 semiconductor article, Darning the SOX: Semiconductor Stocks Look Ready to Consolidate, which was, shall we say, a little early?

Merry Christmas!