What are we looking for?
Canadian-listed equities that are attractive from a technical and momentum perspective.
This strategy identifies Canadian-listed stocks that are demonstrating robust upward momentum by focusing on those trading close to their 52-week highs. It leverages established bullish technical patterns, as recognized by Trading Central’s momentum factor rating, to pinpoint companies with strong recent price performance. By targeting stocks already exhibiting positive trends, the approach aims to highlight candidates with a higher probability of continuing their upward trajectory.
The screen
Our initial screening process targeted U.S. stocks with a market capitalization of more than US$1-billion to focus on less volatile stocks.
We applied a momentum-based approach, which seeks out stocks that consistently reach new highs and maintain higher lows, a hallmark of a sustained uptrend. Specifically, we targeted stocks trading within 10 per cent of their most recent 52-week high.
To further refine our selection, we included only those stocks with a Trading Central momentum factor rating of 70 or more. This quantitative measure highlights companies that have demonstrated superior price performance relative to their peers, based on Trading Central’s proprietary momentum scoring. The momentum factor is rooted in the principle that stocks with strong recent gains are statistically more likely to continue outperforming in the near term.
Additionally, stocks trading close to their 52-week highs often display robust technical characteristics, such as increased trading volumes, positive chart patterns and bullish technical oscillators. To capitalize on this, we also screened for names that have confirmed bullish technical events, further increasing the likelihood of sustained upward movement.
We have also included the price-to-earnings ratio, dividend yield, year-to-date and one-year return for informational purposes.
More about Trading Central
Trading Central is a global leader in financial market research and investment analytics for retail online brokers and institutions. Its product suite provides actionable trading ideas based on technical and fundamental research covering stocks, exchange-traded funds, indexes, forex, options and commodities. Strategy Builder, our stock screener, is available through leading retail brokers in Canada and worldwide.
What we found
Transcontinental Inc. TCL-A-T, Canada’s largest printer and a major player in flexible packaging, leads this week’s list with a Trading Central momentum factor rating of 93 out of 100, the lowest price-to-earnings ratio on our list, at 9.8, and a dividend yield of 4.29 per cent. The stock confirmed a price gap up on June 24, which is a bullish technical event, along with a bullish momentum signal after the momentum oscillator crossed above the 0.00 line.
Dollarama Inc. DOL-T, Canada’s largest dollar-store retailer, confirmed a bullish short-term outside bar technical candlestick pattern on June 23. An outside bar is a two-candle technical pattern in which the second bar completely engulfs the previous bar’s high and low, signalling a potential breakout or reversal owing to increased volatility and a shift in market sentiment. The stock price continues to trend higher, posting a record high just last week.
Including a stop-loss is essential when employing trend-following strategies, as it automatically triggers a sell if the stock moves contrary to expectations, helping to cap potential losses and safeguard your investment capital.
Trading Central Strategy Builder offers a backtesting feature, allowing users to assess the historical performance of an investment strategy. Utilizing a five-year historical period with quarterly rebalancing, the described screen had a 19-per-cent annualized total return, outperforming the S&P/TSX Composite Index’s 12-per-cent annualized total return over the same period.
The investment ideas presented here are for information purposes only. They do not constitute advice or a recommendation by Trading Central with respect to investment in financial instruments. Investors should conduct further research before investing.
Gary Christie is head of North American research at Trading Central in Ottawa.