There has been a lot of talk recently about the Dow Jones Transport $IYT weakness and what that tells us about the state of the markets. Dow Theorists have cause for concern, but the broad markets are not confirming those fears. As usual looking at Transports as a whole doesn’t really tell the whole story. there is a big difference right now between Air, truck and train. The numbers on the railroad car loads continues to remain very strong keeping this area in play. Until just recently the railroads were making all time highs and pulling the rest of the group along, but that changed a couple of weeks ago. Since then railroads have taken a big hit having many believe they are going off the rails. after being drawn to the sector by the @hertcapital mentioning how oversold they Railroad Index had become, I decided to take a look. I don’t think the longer trend is reversing here, so I wanted to look for a place to hop on and catch a ride. Here you can see even within the railroads there is something for all traders at the moment. Most of the charts look like the first three below and would be considered pullback buys. All have CFG readings below zero signalling for me it is time to start looking for a bounce. $CSX and $NSC are the most oversold with RSI also shifting to
a bear range which dampens the longer look. If taking these I would look for a reversal to jump on and hop off at the first stop. $UNP looks a little better as it has not fallen to such oversold levels.
RSI did move below 40, but a quick reversal could save the range. All these look fine for a bouce, but the real set up looks to be $KSU. This charts is by far the most bullish set up of the 4. If you would rather buy strength, this is for you.
$KSU has a Cup n Handle pattern forming near the all time highs with a nice tight flag as the cup. RSI still safely in a bull range while CFG has barely cracked 50. All it would take is a break over 78 to start moving out of the flag with Blue Sky Territory just above over 79.5 for a major break out.
So there you have it, pick a ride based on your style. Either way you go make sure you have a plan for your exit as jumping off a moving train can hurt if you aren’t prepared.
(All market data above are derived from Stockcharts.com, Esignal, and Reutersdatalink)