Captures sustained directional trends using ATR-based indicator
| Strategy Type | Trend Following with Dynamic Trailing Stop |
| Market Outlook | Captures sustained directional trends using ATR-based indicator |
| Risk Profile | Low to Moderate - Built-in trailing stop mechanism |
| Reward Profile | 1:2 to 1:5 on trending moves; Captures 60-80% of major trends |
| Time Horizon | Swing trading (5-20 days) to Positional (1-3 months) |
| Capital Requirement | C$25,000 - C$150,000 for meaningful exposure |
| Margin Type | Cash for share purchases; full premium for long options, CDCC/dealer margin for short options |
| Best Used When | CGI in clear trending phase; Avoid during choppy/sideways markets |
| Tsx Applicability | CGI (GIB.A) is well-suited to Supertrend due to clean, institutionally-driven trending behaviour; it is Canada's largest IT and business-consulting firm and the dominant pure-play IT-services name on the TSX; S&P/TSX 60 constituent with high liquidity ensuring reliable indicator signals. As a global IT-services operator, CGI's revenue is heavily USD/EUR-denominated, so currency moves can amplify or dampen its trends. |
| Ciro Compliance | Fully compliant standard technical-analysis approach; no regulatory restriction on technical strategies. Canadian securities regulation is provincial (CSA members such as the Ontario Securities Commission and Quebec's AMF), with CIRO (Canadian Investment Regulatory Organization) the national self-regulatory body overseeing investment dealers and marketplaces. |
| Contract Sizes | TSX board lot 100 shares; odd lots permitted; typical retail 50-300 shares (~C$7,500-C$45,000 at ~C$150) • 100 shares per contract, American-style, physically settled, CDCC-cleared on the Montreal Exchange (~C$15,000 notional at ~C$150). Single-name option liquidity in Canada is materially thinner than in the US or India • Not available as a liquid retail product in Canada - the Montreal Exchange does not maintain a viable single-stock futures market. Leverage is obtained through options or margin on the cash shares • CGI also trades as GIB on the NYSE; US-listed GIB options (OCC-cleared, USD-denominated) are generally more liquid but introduce USD/CAD currency risk on premium and P&L |
| Trading Hours | 9:30 AM - 4:00 PM ET (TSX regular session); Supertrend signals taken on the daily (4:00 PM ET) close |
| Expiry Considerations | Monthly equity-option expiries (third Friday); weekly options are limited on single names in Canada (more available on US-listed GIB). American-style means early-assignment risk on short legs and around dividends. Roll positional options 5-7 days before expiry |
| Tax Implications | Shares held as investments -> capital gains with a 50% inclusion rate (only half the gain is taxable at your marginal rate; the proposed increase to a 66.67% inclusion rate was cancelled in March 2025). Canada has no holding-period LTCG/STCG distinction. Frequent/active trading and most options activity are generally treated as business income (100% taxable) under the CRA capital-vs-income test (Interpretation Bulletin IT-479R, 'Transactions in Securities'). Active trading inside a TFSA or RRSP can be deemed carrying on a business and taxed. No securities transaction tax or stamp duty applies in Canada |
These are widely-tested default settings. Period 10 captures recent volatility well. Multiplier 3.0 balances between staying in trends and protecting from reversals. They work well for most stocks including CGI.
Wait for daily CLOSE to confirm the flip. Intraday crosses often reverse by close. Enter at next day's open after confirmed flip or on pullback for better entry.
Whipsaws are part of the strategy. Accept small losses (Supertrend limits them). Ensure winners are larger than losers. Don't revenge trade - wait for next clean signal.
Hold until opposite color flip. This could be days, weeks, or months depending on trend. Don't exit on minor pullbacks - trust the trailing stop mechanism.
Yes, but use tighter settings (Period 10, Multiplier 2.0) on hourly charts. Intraday Supertrend has more signals and whipsaws. Daily timeframe is more reliable.
Use Weekly Supertrend for major trend direction. Only take Daily signals aligned with Weekly. Use Hourly for entry optimization. Weekly green + Daily green flip = highest confidence.
ADX > 25 confirms trend strength. RSI > 50 and rising confirms bullish momentum. Price above 50 EMA confirms trend context. Volume > 1.2x average confirms conviction.
Wait for established trend (Supertrend green 5+ days). When price pulls back within 1-2% of Supertrend line and bounces (reversal candle), enter with stop just below the line.
Skip when: ADX < 20, more than 2-3 flips in 20 days, weekly and daily conflict, or 7 days before earnings. CGI reports quarterly (fiscal year ends Sept 30), so check the earnings calendar. These conditions produce unreliable signals.
Strong trend (ADX > 30): Use standard or wider multiplier (3.5). Moderate trend (ADX 20-30): Standard settings (10/3.0). Weak trend (ADX < 20): Skip or use tighter settings cautiously.
Test Period 5-20 and Multiplier 1.5-4.0 with 70/30 in-sample/out-of-sample split. Accept < 20% degradation. Standard 10/3.0 is usually robust. Test across multiple Canadian IT names (e.g., Open Text, Descartes Systems, Constellation Software).
Use Fast ST (7/2.0) + Slow ST (14/3.5). Enter when both align. Exit on Fast flip (early warning). Re-enter if Slow holds. Reduces whipsaws while catching reversals early.
ITM calls (delta 0.75+) for trend following. Bull call spreads for defined risk. LEAPS for weekly signals. Exit options on opposite Supertrend flip. Canadian CGI options on the Montreal Exchange are American-style, CDCC-cleared, and largely monthly (limited weeklies) with thin liquidity; the deeper pool is US-listed GIB options (OCC, USD), which introduce USD/CAD currency risk that should be hedged or sized for.
Track: Win rate (45-55%), Win/Loss ratio (2-3x), Profit Factor (>1.5), Sharpe (>1.0), Max DD (<15%). Compare to CGI buy-hold. Monthly review, quarterly optimization.
Cap CGI at 20% of portfolio. Total tech-sector Supertrend max 25%. Monitor CGI-Open Text correlation - don't hold both at full size. Track total directional exposure.
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