Canadian Pacific Kansas City (CP) plunges 4.06% as bearish technical setup deepens

Canadian Pacific Kansas City (CP) closed the most recent session at $70.48, down 4.06%, reflecting a sharp bearish reversal. This decline aligns with a broader technical context that warrants closer examination across multiple frameworks.

Candlestick Theory

Recent price action reveals a bearish engulfing pattern, with the January 7th session’s long lower shadow and small body indicating strong selling pressure. Key support levels are forming at $70.48 (prior close) and $72.71 (December 5th low), while resistance clusters near $73.46 (January 6th high) and $74.45 (December 31st high). A breakdown below $70.48 may target the next support at $69.99, with a potential for further decline if the $68.88–$69.32 range (November 19–20 lows) is breached.

Moving Average Theory

The 50-day moving average (approx. $74.10) and 100-day (approx. $75.00) are well above the current price, reinforcing a downtrend. The 200-day MA (~$76.50) suggests a long-term bearish bias. A potential death cross (50-day crossing below 200-day) could deepen the sell-off, while a retest of the 50-day MA as dynamic resistance may trigger further declines if rejected.

MACD & KDJ Indicators

The MACD histogram has contracted, with the line (approx. -2.3) below the signal line (-1.8), signaling bearish momentum. The KDJ stochastic oscillator shows a bearish divergence, with %K at 15 and %D at 25, suggesting oversold conditions but limited near-term reversal potential. A bounce above $72.71 may test the 30 threshold, but sustained momentum is unlikely without a volume-confirmed breakout.

Bollinger Bands

Volatility has widened, with the current price near the lower band ($70.38–$74.24 range). Band contraction observed between December 15–18 suggests a potential breakout, but the recent break below the lower band implies a probable continuation of the downtrend. A retest of the $72.71 level may test the band’s inner support before resuming downward bias.

Volume-Price Relationship

Trading volume surged to 2.7 million shares on the January 7th decline, validating the bearish move. However, volume has since softened on subsequent rallies, suggesting weakening short-term sellers. A divergence between volume and price on upthrusts (e.g., January 6th’s 1.7 million shares) may indicate waning bearish conviction, though the overall trend remains intact.

Relative Strength Index (RSI)

RSI has dipped to 28, signaling oversold conditions. While this may attract short-term buyers, the RSI’s failure to close above 30 in recent sessions suggests a prolonged downtrend. A bullish divergence (higher RSI lows with lower price lows) is not evident, reducing the likelihood of a near-term reversal.

Confluence between the Bollinger Band lower band, Fibonacci 38.2% retracement, and key support at $72.71 suggests a critical juncture for CP. While the RSI and KDJ hint at oversold conditions, the MACD’s bearish momentum and moving averages’ alignment favor further declines. Divergences in volume and RSI remain weak, reducing the probability of a reversal. Traders should monitor the $72.71–$73.46 range for potential short-covering opportunities, but bearish bias persists until a confirmed breakout above the 50-day MA with rising volume.