FreightCar America (RAIL) had a brief rally in November (chart below) over its 50-day and 200-day moving averages, but now has slipped back below those lagging indicators. With the recent downgrade to "hold" by TheStreet's Quant Ratings service, a look at the technical condition is warranted.
In addition to the moving averages, the Moving Average Convergence Divergence (MACD) oscillator gave a bearish crossover at the beginning of December and is now below the zero line (see the chart above). Now follow this line of thinking: The On-Balance-Volume (OBV) line turned up in early August, suggesting that buyers of RAIL had become more aggressive and were accumulating a long position. Prices did rally about $8, and have retraced more than half of that advance while the OBV line has only "softened" during December. My interpretation is that while we don't know the average entry price of these longs, I would believe a fair number are at a loss and have held on during the decline. With the chart more bearish than it was just a month ago, there should be increased pressure on these underwater longs to sell.
In this longer-term chart of RAIL, above, we can see prices below their 40-week moving average. The OBV line is in a decline on this time frame, and the MACD oscillator could soon give another sell signal below the zero line. Looking at the history of RAIL, a retest of the $15 level doesn't seem out of the question.
