Lately we have seen some of the biggest names slump or move sideways, and many of these stocks are big industrial and transportation companies. However, the rail group recently came alive lately with some decent earnings and a rumor of a takeover.
This time that rumor is swirling around CSX, which bolted higher last Thursday on enormous turnover – nearly 10x higher than normal volume. This is the sort of action that gets us interested. The stock gapped up and closed at the high of the session – a clearly bullish move.
The textbook definition of follow through occurs four to seven days past a breakout. However, CSX buyers did not wait for that moment, instead pushing the stock higher on good turnover on Monday. Rumor or not, buyers are rushing into the name, and now it appears this stock could be heading much higher. A series of higher lows has CSX in a fat tail condition, and as we have seen in the past, good relative strength tells us this could push the stock into even higher prices (see the month circled). We added some February calls on Monday.
CSX (NYSE: CSX) Video Chart Analysis
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CSX Corporation, together with its subsidiaries, provides rail-based transportation services in the United States and Canada. The company offers rail services, as well as transports intermodal containers and trailers. It transports agricultural products, phosphates and fertilizers, food and consumer products, chemicals, automotive products, metals, forest products, minerals, and waste and equipment; and coal, coke, and iron ore to electricity-generating power plants, steel manufacturers, and industrial plants. The company also exports coal to deep-water port facilities. In addition, it offers intermodal transportation services through a network of approximately 50 terminals transporting manufactured consumer goods in containers in the eastern United States; drayage services, including the pickup and delivery of intermodal shipments; and trucking dispatch services. Further, the company serves the automotive industry with distribution centers and storage locations, as well as connects non-rail served customers through transferring products from rail to trucks, which includes plastics and ethanol. Additionally, it acquires, develops, sells, leases, and manages real estate properties. The company operates approximately 21,000 route mile rail network, which serves various population centers in 23 states east of the Mississippi River, the District of Columbia, and the Canadian provinces of Ontario and Quebec, as well as owns and leases approximately 4,500 locomotives. It also serves production and distribution facilities through track connections. CSX Corporation was founded in 1978 and is based in Jacksonville, Florida.