Captures sustained directional moves using momentum indicators
| Strategy Type | Trend-Following Momentum Trading |
| Market Outlook | Captures sustained directional moves using momentum indicators |
| Risk Profile | Moderate - Blue-chip stability with IT-services / tech sector concentration |
| Reward Profile | 1:2 to 1:4 risk-reward on trending moves; 5-15% swing profits typical |
| Time Horizon | Swing trading (5-20 days) to Positional (1-3 months) |
| Capital Requirement | CA$15,000 - CA$75,000 for meaningful exposure |
| Margin Type | Cash for shares; CIRO/reg-T margin for share futures and options |
| Best Used When | CGI showing clear trend with momentum confirmation and Canadian tech sector strength |
| Tsx Applicability | CGI is Canada's largest independent IT and business consulting firm (FY2025 revenue ~CA$15.9B, ~94,000 staff), an S&P/TSX 60 constituent and a top-weighted name in the S&P/TSX Capped Information Technology Index; institutional and index ownership creates clean trending moves; government-heavy recurring revenue gives blue-chip stability and a low beta (~0.6), so trends are smoother than higher-beta peers such as Shopify |
| Regulatory Compliance | Standard momentum strategy compliant with the Canadian framework. Canada has no single national securities regulator: markets are overseen by the provincial/territorial commissions under the CSA umbrella (OSC in Ontario, AMF in Quebec where CGI is domiciled, BCSC, ASC), with CIRO as the national self-regulatory organisation for dealers and market-integrity rules, and CDCC clearing listed derivatives |
| Contract Sizes | 100 shares per Share Futures contract on the Montreal Exchange (~CA$9,500 notional at CA$95) • 100 shares per options contract on the Montreal Exchange (premium quoted per share x 100) • No lot restriction; typically 50-500 shares based on capital |
| Derivatives Liquidity Note | Canadian single-stock options and Share Futures are far less liquid than US-listed equivalents; CGI options on the Montreal Exchange trade with wider spreads and thinner open interest than its NYSE-listed (GIB) options. Size accordingly, use limit orders, and prefer the cash market or the more liquid US listing when depth matters |
| Trading Hours | 9:30 AM - 4:00 PM ET (TSX); pre-market guidance from US tech futures and NASDAQ |
| Expiry Considerations | Monthly equity options expire the third Friday; Share Futures use quarterly cycles (Mar/Jun/Sep/Dec). Roll 5-7 days before expiry for positional derivative trades |
| Tax Implications | Capital gains: 50% inclusion rate (half the gain taxable at your marginal rate) - the proposed increase to 66.67% was cancelled in 2025 and never took effect. Frequent/active trading and derivatives (options, share futures) are typically taxed as business income (100% taxable) under CRA's trader-vs-investor tests. Shelter eligible holdings in a TFSA (tax-free) or RRSP (tax-deferred), subject to CRA rules on carrying on a business inside registered accounts. Mind the 30-day superficial-loss rule |
CGI offers cleaner trends due to institutional and index ownership, good liquidity for a Canadian tech name, and lower volatility (beta ~0.6) than higher-octane names while still providing tradeable swings. Its government-heavy, recurring revenue makes trends steadier.
CGI earns the majority of revenue abroad (USD/EUR/GBP). When the loonie weakens (USD/CAD rises), CGI's reported profit increases in CAD. Monitor USD/CAD as a tailwind/headwind indicator - its last quarter showed reported revenue well above constant-currency growth on a soft loonie.
For the cash market with proper sizing, roughly CA$15,000-25,000 minimum at ~CA$95/share. Share futures (100-share MX contracts) need margin. Start with shares for learning, and remember Canadian options/futures are less liquid than US ones.
Generally reduce the position ~50% before results due to gap risk; CGI runs a September fiscal year so reports land late Jan, early May, late Jul and early Nov. Post-results, reassess on the numbers, bookings and guidance.
Quality momentum signals tend to occur a handful of times per year - and being lower-beta, the moves are cleaner but smaller than high-beta tech. Don't force trades; wait for indicators, trend and volume to align.
Check the TSX tech index first, but because CSU and SHOP dominate it, also confirm CGI's own relative strength. CGI momentum + genuine sector strength (and CGI leading) = higher probability.
A pullback to the 20 EMA offers the best risk-reward. Wait for the momentum signal, then enter on the pullback with a defined stop. Scale 60% on the pullback, 40% on confirmation.
No new entries 7 days before; reduce existing positions ~50%. Post-results, wait 30-60 minutes to assess the gap and enter only if it holds on volume. Watch constant-currency vs reported revenue and book-to-bill.
Use options when capital-constrained, wanting defined risk, or trading around events - but mind thin Canadian liquidity (use limits, check open interest, or use US-listed GIB options). Use shares for longer holds, simpler management, and cleaner fills.
Initial below the 20 EMA. After +5% move to breakeven. After +8% trail at the 20 EMA. After +12% consider a 2x ATR trail for larger gains.
Use 5+ years of data with a 70/30 in-sample/out-of-sample split. Test ROC periods 10-16, RSI zones 50-80, and EMA combinations. Accept <20% out-of-sample degradation. Standard parameters are often near-optimal; expect more modest returns given CGI's lower beta.
Target 50-55% win rate, 2.0-2.8x win/loss, Sharpe > 1.2. It should beat CGI buy-and-hold with lower drawdown. Wins are somewhat smaller than high-beta tech because CGI is lower-beta.
CGI correlates meaningfully with Open Text and Descartes. If long CGI momentum, avoid stacking those simultaneously. Keep total Canadian-tech exposure < 30% of the portfolio and hedge if overweight.
ITM calls (delta 0.70+) for directional plays; bull call spreads for defined risk/reward; calendar spreads for time decay + direction. Match the strategy to conviction and target, and always verify the Canadian series has open interest (or use the US listing).
Decompose returns into market beta, sector contribution, stock selection and timing. Compare to CGI buy-hold and the S&P/TSX Capped Information Technology Index. Journal trades for pattern identification.
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