Shares of CSX (NYSE:CSX) aren’t looking good. The stock has been in decline as economic and trade-related worries continue to weigh on investor sentiment. Recent quarterly results aren’t helping matters and all said, CSX stock is now down 20% from its highs.
Is it enough to draw in investors, or is the start of a nasty bear market in this rail stock?
If the charts are any indication, more pain may be on the way. There is some hope left for bulls, if support can buoy the name. Or if we get some positive fundamentals news for the stock. But as it stands, the technicals are struggling.
Let’s look at a few charts and see where CSX stock could be heading.
Trading CSX Stock
Click to EnlargeThere is a daily chart to the side and a below that is a weekly chart. Both highlight the not-so-hot setup of CSX stock price right now.
As you can see on the daily chart, CSX stock has a very bearish-looking setup. After declining precipitously from $80 in mid-July, shares continue to put in a series of lower highs. That’s squeezing CSX against a static level of support near $64. Should support give way, the stock will start probing the 2019 lows.
CSX stock is already below all of its major moving averages and Fibonacci retracements. The 20-day is below the 50-day moving average, and the 50-day is crossing below the 200-day. This indicates that both short- and long-term momentum is turning in the bears’ favor.
For bulls to have a shot, they first need $63 to $64 to prove itself as support. From there, they need to get CSX over downtrend resistance (blue line) and the 20-day moving average. If they can muster up the strength for that, clearing the 61.8% retracement near $67 is next on the list.
Should support fail, the year-to-date lows near $60 are the first target. Below that and the 52-week lows near $58 are next.
Click to EnlargeOn the longer term chart, investors can see that CSX is teetering on its 200-week moving average. While the action hasn’t been decisive, shares are actually below this mark now. This key moving average drew in buyers last December, halting CSX’s decline and kickstarting a multi-month rally.
The same momentum has not been seen this time around. Furthermore, long-term uptrend support (blue line) is being leaned on as well. If these levels give way, a decline to $58 is surely possible.
On both charts, a rebound over $71 would be most encouraging for the bulls.
Valuing CSX Stock
An escalating trade war and worries about a recession do not help companies like CSX Corp. What does help CSX, Norfolk Southern (NYSE:NSC), Kansas City Southern (NYSE:KSU), Union Pacific (NYSE:UNP) and other rail companies is a strong consumer.
Thankfully, that’s exactly what we have. With a strong labor market and consumers who are willing to spend — as noted by JPMorgan (NYSE:JPM), Visa (NYSE:V) and others — demand for products remains high. Should that change, then the rails could be in trouble.
Some of that fear is getting priced into the stock as we speak. With an inverting yield curve and manic headlines driving the news each day, how can investors not start to price in that possibility?
Of course, it doesn’t help when CSX stock fails to deliver as well. In July, the company missed on second-quarter expectations. Revenue of $3.06 billion missed estimates by more than $80 million and contracted 1.3% year-over-year. Earnings of $1.08 per share missed consensus estimates by 3 cents a share. Making matters worse, management cut its full-year revenue outlook.
This came after five straight earnings and revenue beats. In Q1, CSX beat earnings estimates by more than 10% and grew revenue 4.75% year-over-year. To say Q2 was disappointing is an understatement.
With additional tariffs looming, we may see some “pull ahead” from buyers in the current quarter. Further, we’re coming up to Q3 and Q4, which are typically heavy demand months for consumers. If that’s enough to improve the fundamentals for CSX stock, we’ll need to it reflected on the charts.
Over $67 give the bulls some spark. Over $71 and momentum can really pick up.