Q&A: CIBC’s Sid Mokhtari offers a bevy of actionable trading ideas

October has tested investor confidence amid a confluence of headwinds. At the forefront, rising oil prices and bond yields, alongside AI buildout and debt-funding concerns, have weighed on markets.

Market breadth has narrowed, with fewer stocks rallying, making stock selection increasingly important.

Against this backdrop, The Globe and Mail spoke with Sid Mokhtari, CIBC’s chief market technician, about whether technology stocks can regain their market leadership. He also recommended a tech stock that may surprise investors, along with four actionable trading ideas across other sectors.

We have seen pressure on many technology stocks. Are AI-related stocks due for a correction after a strong run, especially if earnings growth decelerates in 2027. Or should investors buy tech stocks on weakness given that earnings growth remains robust?

We closely follow semiconductors indices, the iShares Semiconductor ETF (SOXX-Q) and the VanEck Semiconductor ETF (SMH-Q), and both have been in a consolidation pattern. They have stalled from a momentum perspective, and we haven’t seen much alpha in the space. It’s become very bifurcated, very selective.

We’re not seeing big trends breakdown in the technology space so we still think is going to be the leader as we go forward. But it does have risk from a mean reversion or potential drawdown based on how strong it has been.

To your point, it all comes down to whether earnings and revenue growth are going to carry forward. The reported numbers have been great so quants are definitely using weakness to add technology exposure.

Our models show three sectors that are leading.

Energy, both in the U.S. and Canada, is still showing quite well from a breadth perspective. Participation in trends is still very strong within the energy space.

Technology is still reasonable. It is bifurcated, so I’m very selective about my choices when it comes to the tech space.

And health care in the U.S. The sector has been a beneficiary of AI potentially, and even rotation. It’s a sector that you could make the argument is defensive and we are in months when investors may want to have some defensive exposure.

Given the bifurcation in the technology sector, what subsectors of technology are technically strong?

In the tech space, software has been coming up very strongly. I think a lot of people wrote the subsector off believing that AI may be interrupting the industry. We saw a major selloff within software. We now have very strong breadth readings for the software index in the U.S. IGV, iShares Expanded Tech-Software Sector ETF (IGV-A), is an ETF associated with that subsector.

We’ve seen a lot of good base building patterns as well as follow-through in positive mean reversions after major selloffs. Software is the right subsector today from a value perspective and there’s also quality attached to the software space. Microsoft (MFST-Q) has been the leader in that group.

Tech hardware and equipment is the next area of strength followed by semiconductors.

So, if I had to rank them, I would say software comes first, followed by hardware and equipment, and then semiconductors.

All three subsectors are generally still ranking well from our modeling perspective. They’re still producing alpha. They’re still holding their trends.

Taking you through the breadth modeling, software is more broadly participating compared to tech hardware and equipment, and it’s very bifurcated within semis.

In this stock picker’s environment, can you recommend three Canadian stocks that have strong technical and quantitative characteristics and give readers your analysis of the charts, including target prices?

Sure. The first one is Kelt Exploration (KEL-T). The sector has very good breadth composition. It’s in our leading quad of our technical models. It also is a very good quant ranking stock from a value perspective. It is satisfying a lot of relative strength models that are tied to alpha. It’s outperforming against its peers, it’s outperforming against the TSX Composite Index and it has a very strong trending backdrop. We have Kelt as one of the best ranked members within the TSX energy sector.

In the first quarter, the stock broke above $8 with follow-through volume and momentum. Then, it managed to get above $10 in a relatively short time, which shows how much demand there was for the stock. So, I think that it’s a good stock to use any weakness to add exposure.

The stock has a measured move calculation toward $14, $15.

Do you have a couple of other recommendations?

Another one is Northland Power (NPI-T), which was a new addition to our basket of top 10 stock ideas this month.

It’s an improving name in our models, particularly from a relative strength or quad mapping perspective. Previously, we had it in our lagging quad. Now, our composite scoring system, which uses both quantitative and technical analysis, has it in our improving quad.

The stock had been in a base building pattern after a prolonged period of share price decline. When stocks begin to trend sideways, that’s often associated with a shift from supply to demand. In other words, from distribution to accumulation. I think that’s what NPI is representing in our models and it is undergoing a period of accumulation.

The stock has a good technical backdrop. The base is good. Accumulation looks good. It looks cheap on value metrics, and it pays investors a dividend. The technicals are certainly improving so it’s a good emerging name for investors to look at.

A technical move for it projects toward $24.50 to as high as $25. As we go forward, it can extend toward $27.

Another stock idea is NWC, North West Company (NWC-T).

NWC does have some volatility within its bands but each volatility band has been narrowing over the past two years. It’s a name that has roughly a 3 per cent yield. We have seen stronger volume and momentum come into this name, not large liquidity, but volumes have improved.

The stock looks like it wants to probe a new high or probe a new price discovery.

I think a measured move for NWC is closer to $60 to $62.

Since it has an element of volatility, it doesn’t easily come into our models.

If there is volatility on the downside, investors may want to add exposure to it because the stock has successfully and repetitively made higher lows with a flattish top and technically it’s a pattern that is often resolved in the direction of the trend and the trend is positively skewed for NWC.

The stock chart looks good. It has a flattish top as this is the fourth time that it’s encountered resistance at $54, $55. And if you rally to the same level many times, the odds of a breakout becomes likely.

Each month you publish your top 10 stock ideas. Your analysis and recommendations help investors make near-term investment decisions. Do you have any stock recommendations for investors with a longer-term investment horizon?

A stock we think is attractive from a value perspective and is deeply oversold is Pet Valu (PET-T).

The stock has a good value ranking by our fundamental team.

We tend to highlight stocks that have momentum and an alpha backdrop. Names that are deeply oversold don’t come into our basket of top ideas simply because there’s a reason why something is deeply oversold. However, when the fundamentals are very strong, and the stock has a good value proposition, we look at it.

The stock price has trended down over the past two years. It has also been susceptible to tax loss selling pressure, which typically has the bulk of its downside selling sometime in October through to late November, and we’re in that period right now. But, we are seeing thinner volume every time it goes lower, which means the bulk of the selling is behind us.

The stock could have a calculated measured move closer to $23 to as high as $25.

We saw these patterns for Pet Valu in 2023, and this could be one of those situations again.

Another stock I want to highlight, which may be controversial, is BlackBerry (BB-T). BlackBerry is a name that is showing very heavy volume, which is a sign of either short covering or there is a serious demand for the stock.

The stock does have good technical patterns.

Over the past four years, we have seen BlackBerry forming a base. It broke out in the second quarter of this year, and we have seen nothing but follow through on the upside. It does go through ebbs and flows given how much volatility it carries.

This is a stock that is being well received by the hedge fund industry as well as the institutional industry and long-only managers.

It does have a measured move that can put BlackBerry closer to Cdn$17 to as high as Cdn$18.

Lastly, is there anything else that you want to highlight to readers?

We’re not out of the woods yet. October is the most volatile month of the year.

Once we get past October and if we get a reset environment for equities that should be the next best buying opportunity.

We’re not yet seeing enough breadth in the market to be able to give us what typically is a healthy condition for equities.

In other words, we’re probably going to be stuck within a selective process, very bifurcated and susceptible to more volatility as we go forward.

This Q&A has been edited for clarity.