Choo Choo! Look for CSX Corporation to Go Full Steam Ahead!

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CSX Corporation (NYSE:CSX) shares have rallied ever since the international freight transportation company reported its latest earnings results last week. More importantly, the rally in CSX stock took place at a technically crucial juncture, and as a result, has put shares in a more constructive position again where a move higher stands a better chance.

beat the bell stock investing adviceFor the first quarter, CSX Corporation earned 45 cents per share to beat estimates by a penny, and it posted revenues of $3.08 billion, which also trumped expectations of $3.02 billion. Further sweetening things was a hike in the quarterly dividend on CSX stock from 16 cents to 18 cents, as well as a $2 billion share buyback program.

Lastly, CEO Michael Ward said that the benefit of the stronger dollar has been that their clients have more purchasing/spending power. This last point is something I have raised on several occasions in recent weeks, and could well surprise investors in a positive way, particularly with much analysis having focused on the negative effects of a strong dollar.

U.S. stocks have lagged global stocks — particularly stocks in Europe and parts of Asia — as the perceived monetary policies between the U.S. and overseas seemed to diverge. Looking more at the market internals, what U.S. equities need in the near to intermediate term for a better rally is participation of important parts of the market such as financials and transportation stocks.

With Monday’s rally, the transports look to be better positioned to push the broader U.S. markets higher in coming weeks.

CSX Stock Charts

From a multiyear weekly view, we see that in October 2014, CSX stock rallied vertically and above the black upsloping line of resistance. The move was too much too soon, however, and has since led the stock to mean-revert back to the breakout point (blue bubbles), which all else remaining equal should offer good technical support.

CSX stock charts weekly
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On the daily chart, note that CSX last week dipped below its rising 200-day simple moving average (red line) for the first time since 2012, and that Monday’s 4.77% rally has quickly pushed the stock back above this moving average. Overall, the price action since CSX reported earnings last week has been choppy and on higher volume, but the bullish reversal of the two-day rally since last Friday looks to have confirmed a better trading bottom at the very least.

CSX stock charts daily
Click to Enlarge

Through a multimonth lens, the stock remains trading in a channel, and with this newfound upside momentum, CSX stock could soon be breaking out of this formation.

Active investors could consider buying CSX stock above $34.50 for a move into $37 with a multiweek/multimonth time frame. Any sharp bearish reversal of Monday’s rally would call off the setup until the stock stabilizes again.

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Download Serge’s trading plan in the Essence of Swing Trading e-book here. As of this writing, he did not hold a position in any of the aforementioned securities.

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Article printed from InvestorPlace Media, https://investorplace.com/2015/04/csx-corporation-csx-stock-steamroll-higher/.

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