Is Canadian Pacific Setting up for a Break Out?

Published on Friday, 03 February 2012 05:20 Written by TradersHuddle Staff

New York, February 3rd (TradersHuddle.com) - Shares of Canadian Pacific Railway Limited (NYSE:CP) closed the trading session at $71.91 placing the price action in a very tight range, given that calculated support is set at $69.14 and the calculated resistance based on an algorithm of peaks and troughs is set at $72.62

Canadian Pacific Railway Limited (NYSE:CP) is a Class 1 transcontinental railway, providing freight and intermodal services over a network in Canada and the United States. Its mainline network serves major Canadian ports and cities from Montreal to Vancouver, and key centers in the United States Midwest and Northeast.

Canadian Pacific's stock price action indicates that both sellers and buyers are materializing very close to each other, which is indicative to a momentum building area, as the stock can resolve by breaking out of the tight range that developed.

Traders wanting to establish a position should place close attention to Canadian Pacific's price action, as any movement outside its predefined range of $69.14 and $72.62 could grab the attention of momentum buyers, looking for a big movement in the price of the stock. Traders need to be aware that tight range resolution works both ways, hence, a move below support at $69.14 could spark above average selling. A tiered approach can be a good way to approach starting a position in Canadian Pacific's, by establishing a starter position while the stock is in the tight range, and then adding to the position as it breaks and closes above resistance.