Transports overall were a challenging sector for investors in 2024, with the SIA Transportation Equal Weight Index returning only 8.66%, significantly underperforming the double-digit returns seen in other indices. For those seeking exposure to the transportation sector, it is clear that the airlines were the primary beneficiaries, with the US Global Jets ETF (JETS) up 33.21%, while trucks and rails lagged behind. Today, we will take a closer look at two of Canada’s leading railway companies: CP Kansas City Rail (CP.TO) and CN Rail (CNR.TO). CP Kansas City Rail has been an underperforming stock, with a 2024 rate of return of -0.05%, positioning it at the bottom of the SIA relative strength matrix reports in which it is included (a full list is embedded in the chart). This "Unfavored" zone is a no-fly zone for astute SIA practitioners, and as such, CP Rail would be a stock to avoid throughout 2024. Technically, the stock remains Unfavored, buried deep in the red zone, with most reports showing CP Rail near the bottom, notably in the marquee SIA S&P/TSX 60 Index Report, where it ranks 50th out of 62. Its SMAX score is 0 out of a best score of 10, indicating that it is underperforming compared to other asset classes outside of the 60-stock peer group. In simpler terms, cash, bonds, commodities, and even broader equity baskets are all outperforming CP. A few key technical levels are worth noting: the lower tops at $122.93 and $120.52 now serve as upper-level resistance, while the 3-box reversal level is at $111.35. More importantly, from a risk perspective, support is currently at the $100.85 level, which also aligns with the psychological whole level number. Should the $100 level be breached, the critical support levels to watch are $93.17 and $84.39 (4-year critical support).
CN Rail shares exhibit a similar performance to CPKC but are more advanced in breaking support zones. A double bottom breakdown on the point-and-figure chart has formed a bearish triangle pattern. Like CPKC, CN Rail has a low SMAX score of 0, indicating poor relative strength, and it remains deeply in the red across all SIA Reports in which it is a member.
Technically, CN Rail is in a difficult position. Support levels are now at $138.84, $130.83, and $116.18, while resistance levels, which date back to 2021, are significant at $159.48, $165.93, and $179.60. Shares of CN Rail were down -10.53% in 2024, making it the 7th worst performer on the SIA S&P/TSX 60 Index Report, just ahead of companies like BCE (-30.02%), Rogers Communications (-26.08%), OpenText (-24.58%), Magna International (-20.03%), Algonquin Power (-18.70%), and Telus (-11.50%).
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