Norfolk Southern Corporation, together with its subsidiaries, engages in the rail transportation of raw materials, intermediate products, and finished goods. As of December 31, 2014, it operated approximately 20,000 miles of road in 22 states and the District of Columbia. The company also operates scheduled passenger trains; transports overseas freight through various Atlantic and Gulf Coast ports; and provides logistics services. In addition, it provides bimodal truckload transportation services primarily utilizing RoadRailer trailers, a hybrid technology that facilitates over-the-road and on-the-rail transportation in the eastern United States, as well as in Ontario and Quebec through a network of terminals.
Take a look at the 1-year chart of Norfolk (NYSE: NSC) below with my added notations:
NSC has been on a steady downhill slide over the past 10 months. During the last 2 months of the decline, and recent rally, NSC created a clear level of resistance at $80 (green), which had also been support prior. A break above that $80 level should mean higher prices for the stock, and yesterday NSC broke that level.
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The Tale of the Tape: NSC broke through its key level of resistance at $80. A long trade could be entered on a pull back down to that level. However, a break back below $80 could negate the forecast for a higher move and would be an opportunity to get short the stock.
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