CSX Corporation (CSX) is a transportation supplier. The company provides rail-based transportation services, including rail service and the transport of intermodal containers and trailers. CSX’s principal operating company is CSX Transportation, Inc. (CSXT). It serves over 70 ocean, river and lake ports along the Atlantic and Gulf Coasts, the Mississippi River, the Great Lakes and the St. Lawrence Seaway. CSXT also serves thousands of production and distribution facilities through track connections to more than 240 short-line and regional railroads. It transports and exports coal to electricity-generating power plants, steel manufacturers, industrial plants and deep-water port facilities.
Please take a look at the 1-year chart of CSX (CSX Corporation) below with my added notations:
Like most stocks, CSX has had a rough go of it over the last month or two. CSX had been holding a very important level of support at $24 (red) for about 6 months prior to breaking lower. If you had been watching CSX, a short trade would have been advised on that break. A few weeks ago CSX finally found support at $20 (green), which had also been an important level for a couple of months last year. After rallying higher to $23, CSX is now testing the $20 area again. Could CSX bounce once again, or will the stock break even lower?
The Tale of the Tape: After holding $24 for several months, CSX broke that support and fell lower as expected. Now, CSX is finding support at a previous level of $20. If you are currently bullish on the overall market or CSX, a long entry at $20 would make a good trade with a stop set under $20. However, if you are looking to short CSX, the break of $20 would be your entry.
Before making any trading decision, decide which side of the trade you believe gives you the highest probability of success. Do you prefer the short side of the market, long side, or do you want to be in the market at all? If you haven’t thought about it, review the overall indices themselves. For example, take a look at the S&P 500. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.
No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade. Capital preservation is always key!
Christian Tharp, CMT