CSX Is Back on Track -- Here's How to Trade It Now
Shares of CSX (CSX) - Get Report , the fourth largest railroad operator in the U.S., ramped over 4.4% on Wednesday following a blowout earnings report. Other major players in the sector were on the move Wednesday as well. Both Union Pacific (UNP) - Get Report and Norfolk Southern (NSC) - Get Report gained over 2.25%.
This powerful breakout move in CSX drove the stock to new 2016 highs after mounting its best daily gain of the year. The consolidation pattern that has been in place since the March high appears to have ended with a major upside breakout.
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Following the rebound off the January low, which carried the stock over 25% higher, CSX entered a consolidation phase. The stock moved sideways in a narrowing pattern for the next three months. CSX straddled its 200- and 50-day moving averages during the bulk of this action while being capped on the upside by its 40-week moving average. Following yesterday's breakout, all of these levels are now supplying very solid footing for a fresh bull leg.
In the near term, CSX investors should keep a close eye on the $28-to-$27 area. A dip back down to this major support zone, which includes the April and June highs as well as the 40-week moving average, will offer a low-risk entry opportunity. On the upside, a logical initial target is the November 2015 peak of $30.53. Considering the strength of the developing bull leg, this level will likely be cleared as well.
Disclosure: This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.