CSX Could Be Derailed by Continued Weak Earnings
CSX (CSX) - Get Report have been attempting to get its stock back on track after a decline of 43.9%. As coal shipments slow, earnings have been weak and driving down the stock from an all-time intraday high of $37.99 set on Nov. 25, 2014, to its 2016 low of $21.33 set on Jan. 20.
The railroad has been restructuring to offset reduced cargo of coal and energy infrastructure products to support the oil and gas industry at fracking operations near their rail access points. The June report from the Energy Information Administration projects that coal production declined by 28% year over year in May.
That is why analysts expect CSX to earn 45 cents a share when it reports quarterly earnings late Wednesday. While you wait on that report, remember CSX has a dividend yield of 2.8% and a price to earnings ratio of 13.
Here's how to trade CSX based on its daily and weekly charts and key technical levels.
Here's the daily chart.
Courtesy of MetaStock Xenith
CSX closed at $26.67 on Monday, up 2.8% year to date and in bear market territory 29.8% below its all-time high of $37.99 set on Nov. 25, 2014. The stock is down 43.9% from this high to its 2016 low of $21.33 set on Jan. 20. The stock has been a strong performer since Jan. 20, up 25% from the low.
The daily chart shows the Fibonacci retracements from the Nov. 2014 high to the Jan, 2016 low. Since setting the low the stock rebounded and traded around its 23.6% retracement of $25.26 between Feb. 22 and April 13 until setting its 2016 high of $27.97 on April 27. This high was just above the 38.2% retracement of $27.69. On June 27, CSX traded as low as $24.43 before rebounding back above the 23.6% retracement.
This makes the earnings neutral zone between its 23.6% retracement of $25.26 and the 38.2% retracement of $27.69.
Here's the weekly chart.
Courtesy of MetaStock Xenith
The weekly chart for CSX is positive with the stock above its key weekly moving average of $26.34, but below its 200-week simple moving average of $27.90. The 200-week SMA has last tested on strength during the week of April 29 when the average was $27.71. The weekly momentum reading is projected to rise to 55.12 this week up from 53.70 on July 8.
Investors looking to buy CSX should do so on weakness to $24.82, which is a key levels on technical chart until the end of July.
Investors looking to reduce holdings should consider selling strength to $28.04 and $31.17, which are key levels on technical charts until the end of Sept, and the end of 2016, respectively.
The weekly chart shows a red line through the price bars. which is the key weekly moving average (a 5-week modified moving average). The green line is the 200-week simple moving average considered the "reversion to the mean". The study in red along the bottom of the chart is weekly momentum (a 12x3x3 weekly slow stochastic), which scales between 00.00 and 100.00, where readings above 80.00 indicates overbought and readings below 20.00 indicates oversold. A negative weekly chart shows the stock below its key weekly moving average with weekly momentum declining below 80.00 in a trend towards 20.00.
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.