For an "Executive Decision" segment of Mad Money on Monday night, Jim Cramer talked with Jim Squires, chairman and CEO of Norfolk Southern Corp. (NSC) . The transportation company had an investor day presentation on Monday. Shares pushed higher by 3.2% as a result of the company's ambitious plan to lower its operating ratio to 60% by 2021.
Cramer pointed out that the price gain is even more impressive, considering the stock's rally from its December lows and after last month's earnings beat. In 2015, the company's plan was to get its operating ratio down to 65% by 2020 -- and Norfolk Southern just about hit the mark at the end of 2018, Squires pointed out.
The company's plan to improve further will come by growing its revenue at a 5% annual growth rate while at the same time improving efficiencies along the way via precision railroading practices. "This is an aggressive plan, but it's an achievable plan," he said in regard to analysts' questioning whether the company's outlook is realistic. Let's check out the charts and indicators (something that the fundamental analysts don't do).
In this daily bar chart of NSC, below, we can see that prices peaked in September and declined to a "V bottom" in late December. Prices have climbed back smartly with good volume. NSC is back above the rising 50-day moving average line and the rising, 200-day line. The 50-day average line crossed below the slower-to-react 200-day line last month for a belated bearish death cross -- this will be an example where the indicator does not work.
The daily On-Balance-Volume (OBV) line shows a decline from the middle of September to the end of the year, followed by a rise. The strengthening OBV line tells us that buyers are being more aggressive again, like the first half of 2018. The Moving Average Convergence Divergence (MACD) oscillator is in a bullish configuration above the zero line.
In this weekly bar chart of NSC, below, we can see that prices have been in an uptrend over the past three years, with prices more than doubling. Dips towards, and tests of, the rising 40-week moving average line have been buying opportunities. NSC broke the 40-week line in December, but has quickly climbed back above it. The weekly OBV line is bullish and close to a new high for the move up. The weekly MACD oscillator just crossed back above the zero line for a fresh, outright go-long signal.
In this Point and Figure chart of NSC, below, we can see a breakout at $175.22 and an upside price target of $216.41 being projected.
Bottom line strategy: NSC could consolidate its recent gains with some sideways trading above $175, but it looks like a test and break of the September highs is in the cards. Trade NSC from the long side risking below $167 and look for gains to $200 and the $215 area in the weeks ahead.