Market timers and other observers have been trying to glean insights from any upward movement in the railroads in recent months, but the price action of Union Pacific (UNP) suggests that a recovery in rail profits and share prices are not on this train's schedule just yet.
This chart of UNP, above, shows the decline of the past 12 months. Yes, UNP has come off its January lows, but a stubbornly weak On-Balance-Volume (OBV) line tells us that buyers of UNP are not aggressive and a resumption of the downtrend is possible. Prices have rallied over the 50-day moving average line but are still below the declining 200-day line. The Moving Average Convergence Divergence (MACD) oscillator is crossing to the downside for a "liquidate longs" sell signal.
There are a number of clues we want to point out on this longer-term chart of UNP, above. First, while UNP has come off its January low, there has been no retest of those lows. A successful retest of the low would give everyone watching UNP more confidence that a shift in the trend was potentially under way. Price rallies to the underside of the 40-week moving average line have so far been rebuffed. The OBV line has made a slight uptick in recent months, telling us that buyers of UNP are only mildly aggressive in accumulating longs. The trend-following MACD oscillator generated a cover shorts buy signal but not an outright buy signal. A retest of the January low around $70 could be the path of least resistance for UNP.