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Trade of the Day: Norfolk Southern (NSC)

While politicians attempt to keep the economy from running off the rails, this transport is speeding south


With the Dec. 31 deadline for going over the fiscal cliff upon us, both traders on Wall Street and consumers on Main Street appear to be getting increasingly nervous. We saw the Conference Board report sagging Consumer Confidence numbers, and stocks are continuing to sell off, so we anticipate this trend is going to continue in the short term. Seeing as how transports tend to lead the market lower at times like these, we think Norfolk Southern (NYSE:NSC) is a good candidate on which to ride the bearish wave lower.

After collapsing in late-October and continuing to decline through most of November, NSC has made a nice bounce back up to resistance at $63 — the level that was formed when the stock gapped down in October. However, that resistance level appears to be holding quite nicely, and the stock is rolling over. Having reached $61, NSC is now at its lowest point since Dec. 5. We anticipate the stock will continue to fall at least to the support it established just above $59 on Dec. 3, and that it has the potential to drop further if the market has a severely negative reaction to going over the Fiscal Cliff.

With support at $59 in mind, short-side trades can look for a quick dip or you buy near-term puts on NSC that expire before NSC is scheduled to release its quarterly earnings.

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