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Canadian Pacific’s comfortable ascent looks set to continue

Canadian Pacific was among our list of large Canadian stocks with downside risk


Hi Lou,

Is CP on your radar and should I move some of my RRSP assets into the stock?


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Hey Mike,

Thanks for the assignment.

Rail stocks have been on my radar since November of 2009 when Warren Buffett announced that Berkshire Hathaway would buy out the 77.4 per cent of Burlington Northern Santa Fe that Berkshire Hathaway didn't already own. At the time he saw it as an opportunity to leverage a recovery in the economy of the United States. Buffett doesn't get 'em all right but he nailed this one. Not only did the economy gain traction but rail traffic increased as shale oil from North Dakota's Bakken formation started to move by rail because of a lack of pipeline capacity in the region.

Canadian Pacific Railway has a solid position in the logistics needs of the Bakken shale oil play moving not only oil but all the sand, chemicals, and steel needed to exploit the reserves. The downside to the increase in oil traffic has been that prairie grain shipments have been squeezed causing a stir in Ottawa.

An inspection of the charts will identify if CP should be considered for your retirement account.

The three-year chart indicates that the shares have been on a run since October of 2011 when a double bottom formed signalling the start of a new advance. What is observable is the golden cross that surfaced in December of 2011 and the intact uptrend line that has supported the move higher. The stock has tested support along the 50- and 200-day moving averages over the last two and a half years but didn't breach either.

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The MACD and the RSI on the six-month chart both generated buy signals in April of 2014 as the company reported its first-quarter results which beat expectations. The momentum added another $30.00 to the stock price in just over two months. Gotta love that when it happens! CP would be a good choice for your retirement account as the stock continues to beat expectations. The company will report second-quarter results on July 17 make sure to put it on your calendar.

Make it a profitable day and happy capitalism!

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