Heavy Metal Breakouts: How Rising Commodity Prices are Lifting Canadian Construction Stocks on the Chart

When it comes to investing in the construction industry, it’s easy to brush it off as “boring” and move on to the more exciting tech or consumer stocks. But what many investors don’t realize is that the construction sector can offer some lucrative opportunities for those willing to do their homework. And with a little bit of technical analysis and trend following, you can spot potential breakouts before they happen.

Take Canadian construction stocks, for example. These companies may not have the sexiest products or services, but they can be great indicators of a strengthening economy. As commodity prices rise, so does the demand for heavy equipment, and that’s where these companies come in. Plus, with a shortage of commodities due to underinvestment caused by misguided ESG policies, there’s even more potential for these stocks to move higher.

But how can you spot these opportunities? One strategy is to look for chart patterns that signal a potential breakout. For example, if a stock has been trading in a tight range and then suddenly breaks out to the upside, that could be a sign of a strong trend. Another strategy is to use a simple trend following system to trail the price. This means setting a stop loss at a certain level and then adjusting it as the stock moves higher.

So, if you’re looking for a potentially profitable but often overlooked sector, consider Canadian construction stocks. Just remember to do your due diligence and keep an eye out for those chart patterns and trend signals. And don’t forget to have a little fun with it – after all, investing doesn’t have to be all work and no play. And as they say, “The trend is your friend”

Enjoy the charts!

Finning Intl, Inc. (TSX:FTT)

Finning, the Caterpillar of Western Canada’s heavy equipment, has been showing up on momentum scans since it surged higher off the recent low of $23.51. Now, the price action is setting up below a new all-time high. Stocks breaking out to new highs can offer profitable opportunities for traders using momentum-based strategies. This strategy is based on the idea that trends in the market tend to persist. When a stock reaches new highs, the absence of sellers who have previously lost money makes this strategy even more effective. To use this strategy, you can identify a stock that has reached new highs, and then set a stop-loss order below the recent low. As the stock continues to rise, you can adjust the stop-loss to lock in profits. This imbalance can translate into an acceleration in upward price momentum. Watch for a breakout and ride the wave! Read more about momentum investing my clicking here.

North American Construction Group Ltd (TSX:NOA)

North American Construction Group first started showing up on momentum scan results on December 1st. We alerted readers when the price action was trading at $18.42 and threatening to break out above a major horizontal resistance line. We alerted readers five more times as the price action then consolidated along the 50-day moving average (which is also the 10-week moving average) in the form of a bullish pennant continuation pattern as seen on the chart below. Now, it becomes a case of trend being a friend until the one time it’s not.

Toromont Industries Ltd. (TSX:TIH)

Toromont Industries, the Caterpillar of Eastern Canada’s heavy equipment, is showing up on momentum scans as price action sets up between a horizontal resistance line and the upper trendline of a giant continuation wedge. I like when price coils between the upper trendline of a pattern and horizontal resistance, as it can be like compressing a jack-in-the-box. The upside move can be explosive upon breakout. If one adds the 50-day and 200-day moving averages, they are setting up for a golden cross, which is a bullish indicator that increases the probability of the technical setup. Watch for a breakout as it signals the starting point of a continuation of the uptrend.

Wajax Corp. (TSX:WJX)

Wajax is a heavy equipment dealer in Canada that sells some of the most notable brands. It first appeared on momentum scans on January 11th when price action was threatening to breakout from a falling wedge continuation pattern. Now, price action is threatening to push above another level of resistance as the weekly PPO momentum indicator crosses above the zero line, signaling that momentum has turned positive. Read my blog article for simple strategies on how to trail momentum with a stop-loss order after a technical signal is given by clicking here.

And there you have it folks, a rundown of some of Canada’s construction stocks that are poised for a breakout or trending higher. But don’t just take our word for it – the charts speak for themselves. As we’ve demonstrated, even the most “boring” sectors can offer opportunities for traders when the stock charts offer a tactical entry and a simple trend following system. And remember, a strong construction sector is a sign of a strengthening economy, and as demand for heavy equipment rises with commodity prices, these stocks could keep climbing. So don’t overlook the construction sector, it could be a valuable opportunity.

And if you liked this blog post, share it with a friend! Or don’t, we don’t really care. But either way, just make sure you’re not left holding the bag when the construction market takes off like a Bobcat on a Tim Hortons run.

To learn more about chart patterns and how to trade them, visit our education section by clicking HERE.

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