Shares of Norfolk Southern ( NSC) were raised to a fundamental "buy" recommendation by a sell-side firm Friday ahead of a potential railroad workers strike looming this coming Monday. I understand President Biden could intervene but this is above my pay grade.
Let's check out the charts of this major transporter of all kinds of industrial and agricultural products.
In the daily bar chart of NSC, below, we can see that the shares topped out back in the November to March timeframe. Prices started a downtrend in earnest in April and now the slopes of the 50-day and 200-day moving averages are negative.
The On-Balance-Volume (OBV) line has moved sideways the past 12 months but generally has followed prices up and down. Within this sideways movement we can see weakness the past two months.
The Moving Average Convergence Divergence (MACD) oscillator shows some improvement from late May but is now poised to cross to the downside.
In this weekly Japanese candlestick chart of NSC, below, we see a mixed picture. The shares are in a longer-term downtrend as they trade below the declining 40-week moving average line. The candle patterns show some lower shadows below $125 suggesting some rejection of the lows.
The weekly OBV line, however, shows a one-year decline into July telling us that traders have been more aggressive sellers for a long time. The MACD oscillator is in a bearish alignment below the zero line but the two moving averages that comprise this indicator are narrowing.
In this daily Point and Figure chart of NSC, below, we can see a nearby price target in the $213 area.
In this weekly Point and Figure chart of NSC, below, we can see a price target of $216.
Bottom-line strategy: The trends of NSC are still down but we could start to see some basing action in the weeks ahead as the pace of the decline has slowed and that can sometimes foreshadow a price recovery.
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Performance is excellent, free cash flow is robust, guidance is solid and sales are growing. Here's my one nitpick and how to play the stock.
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