Loren sent me a message last night asking if I thought NSC was a short after the plunge it took yesterday. Before today’s session my answer would have been “yes, as long as I can find a good entry point that gives a good risk/reward”. Had I jumped in yesterday I probably would have put a stop at 34, which had been support and should have turned into resistance. If I had done that I would have been stopped out at today’s open. This is a good example of why I don’t like to chase shorts. Stochastic was already in/near oversold and the stock had already fallen a good distance in just a few days. I’m much more comfortable shorting rallies in an established downtrend.
Now that it’s bounced back from yesterday’s losses I think that a break of 34 would be a good trigger for a short. It looks like there’s good support around 34 and maybe yesterday’s slide was exaggerated by the general market’s weakness. If it does break 34 the 200 DMA might be a good target to take profits.
I would add that NSC has been a consistent winner for a while, so I would guess that fans of this company will not give up easily. You would do well to keep a left eye open on other transportation stocks and especially other railroad stocks for additional cues.
Thanks Mike.
Hey Mike,
This is definitely one i’ve got on my short “short” watch list.. wanted to pull trigger on a trade yesterday after retreating from resistance around 35 at the 50dMa, but didn’t want to be holding the bag if they reported blow out earnings this morning. I think it offers good risk/reward should it bounce up to that resistance point again with little buy interest. Although, looks like it wants to fall apart right now. I agree.. 200DMA around 30 or so looks like good place to take profits if you have ‘em.
I didn’t even realize that earnings were on the horizon until Duru mentioned it to me yesterday. I’d just assumed that the first plunge through 34 was due to earnings. NSC sure is drawn to 34 like a magnet but it’s looking like the party may be ending now.
They beat Wall St. estimates this morning, but looks like selling pressure may be due to costs next quarter related to a derailment in South Carolina that killed 9.. CEO has said there are lawsuits pending as well. Of course, the breakdown of other railroad stocks isn’t helping any. One thing is for sure right now – you certainly don’t want to be long!