Canadian National Railway Company (NYSE: CNI)

Canadian National Railway Company  (CNR) is engaged in the rail and related transportation business. The company manages its rail operations in Canada and the United States. The company’s network of approximately 20,000 route miles spans Canada and mid-America, connecting three coasts: the Atlantic, the Pacific and the Gulf of Mexico. CNR’s network, and its co-production agreements, routing protocols, marketing alliances and interline agreements, provide CNR customer’s access to all three North American Free Trade Agreement nations. In August 2011, the Company sold IC RailMarine Terminal Company to Raven Energy, LLC. In March 2011, Metrolinx acquired CNR’s Kingston Subdivision rail line. Effective December 31, 2011, the company complete the merger of three of its the United States operating subsidiaries, which include Duluth, Missabe and Iron Range Railway Company, Duluth, Winnipeg and Pacific Railway Company, and Wisconsin Central Ltd.

To review Canadian National’s stock, please take a look at the 1-year chart of CNI (Canadian National Railway Company) below with my added notations:

CNI has created a couple of important price levels to watch. First, CNI has formed a clear $80 (navy) level that spans the entire duration of this chart. That $80 level was the stock’s 52-week high resistance before CNI broke above it. In addition, the stock has a previous, lower level of support (green) at $75. The stock currently appears to be pulling back to the breakout level of $80.

The Tale of the Tape: CNI has a key level to watch at $80. A long trade could be made on a pullback to that support with a stop placed under it. A break below $80 would be an opportunity to enter a short trade in expectation of a fall back down to $75 where another long position could be entered.

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!

Good luck!

Christian Tharp, CMT