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Full Steam Ahead For Canadian Pacific Railway

08/01/05 12:11:26 PM
by Gary Grosschadl

Canadian Pacific Railway (CP) is a transcontinental carrier operating in Canada and the US. Second quarter earnings propelled the stock upward.

Security:   CA:CP (TSE & NYSE)
Position:   Buy

Late in 2004 this stock broke into all-time high territory. The weekly chart below shows this breakout and the current breakout from a rectangle pattern. The rectangle is a continuation pattern that forms as a trading range during a pause in the trend. Rectangles are sometimes referred to as trading ranges, consolidation zones, or congestion areas.

The breakout volume is expanding but not exceptional. Volume needs to stay robust or the breakout move could falter. A modest target would be a move equal to the height of the rectangle before taking another pause. For CP, that would be a move to about $52 where another consolidation could occur. A close below the breakout point of $47 could signal a false move.

Figure 1: Weekly chart of CP shows a strong uptrend.
Graphic provided by:
The displayed indicators all show good upside potential. The directional movement indicator at the top of the chart shows a reversal of the DIs or directional movement indicators. Shortly after the bears assumed temporary control (-DI over +DI), the bulls once again took charge. With the ADX at a healthy level of 27, trend strength is good which may fuel further moves.

The lower indicators all show upside room. Note the RSI (relative strength indicator) shows a bounce off its key 50 level - this often points to good upward momentum.

Gary Grosschadl

Independent Canadian equities trader and technical analyst based in Peterborough
Ontario, Canada.

E-mail address:

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Date: 08/02/05Rank: 5Comment: 

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