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TheStreet Open House

3 Buys Making New 52-Week Highs

Stock quotes in this article: MTU, CSX, DDR

52-Week High: $24.69

Beta: 1.32

Price-to-Book Ratio: 2.77

I love the chart pattern for CSX, and so do trend-followers. The fast-moving averages are rising and are above a rising 200-day moving average. This applies for both the widely watched daily chart, and for the weekly price chart that I pay closer attention to.

CSX appears ready for a breakout above the $25 level, and I wouldn't be surprised to see the shares holding above $25 by the end of summer. There is a lot of truth to the saying "buy in May and go away." But in the case of CSX, the bullish price pattern appears solid.

Lower energy prices overall should help keep more disposable income away from the gas pump and direct it toward retail purchases and products using rail for transportation. Shares of CSX have increased 8.8% in the past year. After accounting for dividends, the total gain is more than 10% from a year ago.

Analysts overall also agree with my bullish thesis. The average analyst target price for CSX is $26.63. The current dividend yield is 2.4%, and trading volume is high enough volume that options are a viable entry mechanism.

Instead of trying to time the market perfectly, you can sell put options. For example, if you sell the May $25 put for 63 cents (midpoint between the bid and ask at the time of writing), you reduce your total risk from $24.61 to $24.37.

A 1% savings may not appear to be much at first glance, but the options expire in 17 trading days. I like the May expiration because of the fast time decay, and because it allows for an entry before the next ex-dividend date.

Selling the option does limit your profit potential to 63 cents until the time of option expiration, but the shares have to trade higher than $25.24 before buying shares makes more sense. If the shares are trading at more than $25 at the time of options expiration, you won't likely get the shares put to you, but making a 2.5% return in 17 trading days isn't bad.

At the time of publication, Weinstein held no shares in stocks mentioned.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

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