Transports have had a tough go of it in 2015, especially the rails. Each glimmer of rally hope has been beaten further down. Now we have several names clinging to support and fighting off yet another leg lower. Kansas City Southern (KSU) is one in the group and one with a fairly clear view here.
It's fair to say up front, though, not all is lost on KSU. This is just on the bearish watch list. In fact, those looking for an oversold bounce might have KSU on the radar. This is one of those charts that can be on both lists right now: buy or short.
On the long side, KSU is at price support and we have a slow stochastics very oversold, yet in its oversold nature there is a bullish cross on the 8,5 measurement. In the past, KSU has bounced several percentage points when this has occurred. However, before you get all antsy to buy this one, there are several yellow flags along with very bearish signs. The past bounces also saw the RSI and MFI oversold, or nearly oversold, most of the time. We don't have that here.
Also, notice on the past bounces how the solid black line in the MACD separated from the purple line by a great margin. Again, we are lacking that here. This puts KSU squarely in the bears' crosshairs, and all we need is a price closing below support. Any close under $101 is going to garner bearish attention, while a close under $100 will remove even psychological support. Those would be my alerts.
There is no reason to short right here. Sacrificing an extra dollar or two of downside should significantly increase probability of success. If I were long, then I would be positioning some puts with a minimum strike of $100 under my shares right now.
Expanding to the weekly view brings in the importance of the support on the daily line. This chart looks a bit like a horror feature out of Stephen King's Under the Dome. KSU has been trapped under this dome for a year now. We haven't tested this $100 area of support for a year and now here we are stuck under the dome with trend and momentum dying quickly. There is nothing I can see that is bullish right here, and unless we get the price back over $108, we'll stay bearish.
It's the same on the daily. If you flip back to that chart, you'll see the trading channel the stock has been involved with for months now and how the $108 area marks the cap. If KSU were to see the short-term 13 period Aroon Oscillator pop back over 0, then I would be more optimistic of at least sideways movement, if not a decent bounce. If that does occur in combination with the vortex indicator crossing over bullish or the RSI pushing over 50, then a few call spreads for the speculative trader would look attractive.
Until then, keep the eye on the prize, and that price is much more downside if KSU sees a close under $100, especially on a weekly chart.