Trade of the Day: CSX Stock on a Downhill Slope

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CSX Corporation (CSX) — This leading U.S. rail network operator transports bulk commodities, industrial products and intermodal containers over a network of about 21,000 route miles across the United States and Canada. Like shares of other transportation companies that rely on revenues from commodity shipments, CSX stock has been in a sharp decline.

With commodity prices expected to remain low for the foreseeable future, CSX Corporation is likely to continue to struggle this year.

S&P Capital IQ Equity Research, which rates CSX stock a “Hold,” sees revenues falling another 4.5% this year after declining 7% last year. Its analysts expect volumes to be down, especially coal and oil shipments. And they project 2016 earnings will fall to $1.93 per share from $2 per share in 2014, before turning higher in 2017.

CSX stock is in a bear market. In November, buyers unsuccessfully attempted to break the bearish resistance line, then at about $28. The attempt failed when CSX stock confirmed the downtrend by breaking support at $27 in early December.

A low at $21.33 was made on Jan. 20, in what appeared to be a small saucer. But a rally from the saucer failed at the bearish resistance line at about $26 with heavy selling. Shallow support exists at the 50-day moving average at $24.

Sell CSX stock short at $24 with a downside target of $20 for a potential short-term profit of roughly 17%. Be sure to enter a stop-loss order at $26 to protect against the possibility of theoretically unlimited losses in the event of a rally.

And be aware that if you hold shares short through a dividend, you will be responsible for covering it. CSX Corporation pays a quarterly dividend of 18 cents (current yield of 3%), and the next ex-dividend date is expected in late May.

CSX Stock Chart
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Article printed from InvestorPlace Media, https://investorplace.com/2016/03/csx-corporation-csx-stock-trade-of-the-day/.

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