Technical analysts who follow Dow Theory and really dig down into individual stocks will keep track of trends on Norfolk Southern (NSC) . NSC is one of members of the Dow Transportation Average, which is one-half of the "theory." NSC has made a recovery rally this year, recouping about half the decline suffered in 2014 and 2015. When a market comes halfway back from a decline we get to ponder whether the glass is half empty or half full. Let's check the charts to see if we can get some clarity.
In this daily chart of NSC, below, we can see a V-like turnaround in February. You had to be a nimble trader to capitalize on that reversal. Prices turned up and crossed above the popular moving averages. The slope of the 50-day average turned up later in March and the 200-day average made its turn higher in early May after a bullish golden cross at the end of April. A rising On-Balance-Volume (OBV) line confirms the price advance until late July. Since July the OBV line moves sideways to lower, even though prices move higher. A higher price pattern with a weaker OBV line signals that sellers of NSC are being more aggressive. In the lower panel there is a bearish divergence between higher prices in July through October but lower momentum highs. A bearish divergence like this example tells us that the pace of the advance is slowing. There is a lot of academic research showing that momentum peaks before prices and that is borne out with this chart of NSC.
In this weekly chart of NSC, below, we can see that prices are above the rising 40-week moving average line, but prices appear to be heading down for a retest of that line. Now look at the OBV line on this weekly time frame -- flat the entire year. Has the rally been short covering? I am not sure, but I can say that buyers have not been aggressive. In the bottom panel I can see that the trend-following Moving Average Convergence Divergence (MACD) oscillator is crossing to a liquidate longs' sell signal (a sell signal above the zero line).
Bottom line: With NSC below the 50-day average a deeper decline to the 200-day average line may not be far off.