Genesee & Wyoming Inc. owns and operates short line and regional freight railroads, and provides railcar switching and other rail-related services. It operates through three segments: North American Operations, Australian Operations, and U.K./European Operations. The company transports various commodities, including agricultural products, autos and auto parts, chemicals and plastics, coal and coke, food and kindred products, lumber and forest products, metallic ores, metals, minerals and stone, pulp and paper, and other commodities.
Take a look at the 1-year chart of Genesee (NYSE: GWR) below with my added notations:
After the stock’s August through October, sideways move, GWR pushed above its $70 resistance (green) in November. During that stretch, the stock has had a tendency of creating support and resistance levels at the increments of $5 (blue). Not only could traders expect a bounce off the recent $70 level, but knowing how GWR moves could provide future trading opportunities as well.
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The Tale of the Tape: GWR tends to react to each $5 level. A long trade could be made on a break through $75, or on a pullback to $70, with a stop placed under the level of entry. A short trade could be made on a break below $70.
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