WSP Global Momentum Strategy

WSP is one of the world's largest engineering and professional services firms, with a record backlog near C$20 billion. As governments and the private sector invest in transit, transportation, water, power and buildings, WSP captures a meaningful share of the design, environmental and program-management work. Its backlog and stock often lead or reflect overall infrastructure-cycle sentiment.

Value investing asks 'what is this stock worth?' and buys when price is below intrinsic value. Momentum asks 'which direction is price moving?' and buys stocks already rising. Value buys cheap stocks hoping they'll rise; momentum buys expensive stocks expecting them to get more expensive. Both can work, but they require different approaches.

12 and 26 periods are the classic MACD combination, widely used by traders globally. This creates somewhat self-fulfilling behavior as many traders watch these levels. For WSP, these periods work well because the stock trends for extended periods during capex cycles. The 12/26 combination balances responsiveness with noise filtering.

That's why stop losses are essential. Place your stop at 2x ATR below entry or below the recent swing low. If price drops to your stop, exit with a small loss (should be ~2% of capital if sized correctly). Not every momentum signal works - the edge comes from winning trades being larger than losing trades.

Best times: after a positive Federal Budget or Economic Update (infrastructure capex increase), after major project awards or contract wins, when the S&P/TSX Capped Industrials is trending up with ADX > 25. Avoid: the week before the budget/update, 3 days before results, when the Bank of Canada is hiking, and during global risk-off periods.

Only take momentum entries when ADX > 25 (confirms a trending market). If ADX < 20, the market is ranging - EMA crossovers will give false signals. Watch ADX direction too: rising ADX = strengthening trend (stay in), falling ADX = weakening trend (prepare for exit). ADX > 50 may indicate trend exhaustion - be cautious.

Initial entry: 100% of the planned base position. After 1x ATR profit AND the first pullback to the 20 EMA: add 50% (so now 150%). Move the original stop to breakeven before adding. Each addition has its own stop. Maximum position: 150% of base. This way you're only risking profits on additions, not original capital.

The Federal Budget (and Economic Updates) announce government capex priorities. Increased infrastructure spending = bullish for WSP. Canadian budget timing varies year to year, so track the calendar rather than a fixed date and avoid positions in the week before (binary-event risk). Post-budget, if allocations are positive, momentum setups have strong catalyst support.

ITM calls (delta 0.65-0.75) for confirmed trends give good delta participation. Bull call spreads (buy ATM, sell at resistance) define risk and target for moderate conviction. Use 20-30 DTE minimum. If IV is elevated (post-catalyst), spreads protect against IV crush. Canadian single-stock options are less liquid than US names, so use limit orders and watch the bid/ask spread.

Check the S&P/TSX Capped Industrials vs its 50 EMA. Check peers: Stantec, AtkinsRealis, Aecon, Bird Construction - at least 2 of 4 should be above the 50 EMA and uptrending. Calculate WSP relative strength vs the S&P/TSX 60 (should be positive). Cross-asset: copper above its 50-day MA, lumber/building-products positive. Score 3+ of these factors for strong confirmation.

Optimize parameters (EMA periods, ADX threshold) with walk-forward testing over 5+ years including different capex cycles. Create a composite score (0-10) from EMA alignment, MACD, ADX, volume, sector and relative strength. Classify the regime (trending/ranging). Backtest by score bucket. Trade only Score 6+. Target: win rate > 50%, profit factor > 1.8.

Direct: S&P/TSX Capped Industrials, lumber and building products, aggregates/materials. Global: copper (infrastructure and electrification demand), US infrastructure ETF (PAVE), global engineering peers (AECOM, Jacobs, Caterpillar). Macro: the Bank of Canada rate trajectory, global risk sentiment. Create a cross-asset score - 4-5/5 = maximum conviction, <3 = reduced size. Copper and lumber are particularly useful as leading indicators.

High-importance features typically: peer breadth (sector confirmation), ADX (trend strength), relative volume, and relative strength. These capture the key factors traditional analysis also values. Feature-importance monitoring helps refine the model and provides insight for manual trading. Retrain quarterly as relationships evolve.

Delta 0.70-0.80 for strong momentum (Score 8+), 0.55-0.65 for moderate. WSP moves are steady - gamma is less critical. Use 20-25 DTE minimum, roll before <10 DTE. Monitor IV percentile: post-catalyst IV may be elevated - use spreads. Calm trending periods have lower IV - naked options are efficient. Calculate theta impact vs expected gain, and factor in Canadian option liquidity/spreads.

Base allocation 6-8%, maximum 10% during strong themes. Industrials/infrastructure sector limit 15%. Manage correlation with other cyclical positions (Stantec, AtkinsRealis add to exposure). Reserve capital for pyramiding. Strategy drawdown limit -12% - pause if breached. Track separately, compare to a buy-and-hold benchmark. Options improve capital efficiency.