It is good to keep an eye on the railroads, for at least two reasons. One is that some of them are part of the Dow Jones Transportation Average (DJTA) and we don't want to ignore what that half of the Dow Theory might be saying.
Second, that sage investor in Omaha has a stake in them. Let's look at Norfolk Southern (NSC) today and see if it might be bottoming.
A bottom is a process, not a point in time (however, with hindsight we can point to the absolute low tic). In a bottom, you want to see prices stabilize after a long decline and you want to see accumulation -- signs that investors are buying.
In this daily chart of NSC, above, we can see that last month NSC rallied above the 50-day and 200-day simple moving average, but it has now slipped back below the 200-day and looks poised to retest the 50-day.
The On-Balance-Volume (OBV) line made a low in late February, but since then it has not made that much improvement. Buyers are trading more shares of NSC on days when it closes higher, but this is not aggressive buying.
In the lower panel, we can see a bearish divergence, as prices made higher highs the past two months and the momentum study made equal highs. A divergence is not an automatic sell (or buy) signal, but rather it is a warning about a possible shift in the trend.
In this longer-term weekly chart of NSC, above, we can see that the OBV line on a weekly timeframe peaked in early 2015 or late 2014, and is still pointed down. The 40-week simple moving average line has a negative slope down, telling us the longer-term trend is down. Prices had rallied above the 40-week, but are now right on that line.
In the lower panel we can see the Moving Average Convergence Divergence (MACD) oscillator (made up of three exponentially weighted moving averages) generated a cover shorts buy signal below the zero line, and an outright buy signal is not at hand.
Combining these two charts, I would look for NSC to retest the $75 to $70 area, or even retest the $65 low, but regardless of the price action, we need to see volume increase on the rallies. We need to see evidence that investors are making a commitment to the long side to feel comfortable that we have made a bottom.