Kansas City Southern, through its subsidiaries, engages in the freight rail transportation business. The company operates north/south rail route between Kansas City, Missouri, and various ports along the Gulf of Mexico in Alabama, Louisiana, Mississippi, and Texas in the midwest and southeast regions of the United States. It also operates direct rail passageway between Mexico City and Laredo, Texas serving various Mexico’s industrial cities and 3 of its seaports; a 157-mile rail line extending from Laredo, Texas to the port city of Corpus Christi, Texas; and KCSR rail line between Meridian, Mississippi and Shreveport, Louisiana, as well as owns the northern half of the rail bridge at Laredo, Texas.
Take a look at the 1-year chart of Kansas City (NYSE: KSU) below with my added notations:
Over the last 10 months KSU has consistently moved higher. During that time the stock had also formed a nice trend line of support (green). Always remember that any (2) points can start a trend line, but it’s the 3rd test and beyond that confirm its importance. So, you can see that KSU’s trendline is very important. Yesterday the stock broke the support.
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The Tale of the Tape: KSU has broken below trend line support. A short position could be entered on a rally up to the trendline, which is currently near $116, with a stop placed above that level. A long position could be entered if KSU were to break back above the trendline.
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
Follow me on Twitter: @cmtstockcoach