Want to take a flier on a railroad stock? Check out these charts. (November 29, 2017)
DJUSRR XLK DJUSRR KSU NSC UNP
Railroads ( INDEXDJX: DJUSSR ). We had a pretty nasty sell-off today in Tech ( NYSEARCA: XLK ). If you were just focused on Tech ( NYSEARCA: XLK ), for a while now, I will admit it I have if we are just looking at sectors, I have been looking at Tech ( NYSEARCA: XLK ) quite a bit because it is what has been making really good money; lately financials and things too. Hey man, you go where the money is going, and so that was working. I think it will still ultimately work. You see this massive volume here, huge volume on this big old red bar. The last time that we have seen volume like that was here and here and back here. And what did that turn out to be? Well, actually it turned out to be happening for much lower prices and then we are off to the races. I am not saying that Tech ( NYSEARCA: XLK ) is over, it’s not. But here what is important for you to see is, there is a money rotation going on.
There is still a lot of money in Tech ( NYSEARCA: XLK ) but if you look at the Rails ( INDEXDJX: DJUSSR ), this was a big, massive move today. After this type of consolidation for a couple months here and this little thing here; what I am basically doing is I am drawing boxes, this thing has been trading kind of sideways for quite a while. Now we are finally getting this breakout, this move to the upside, and that is an important move. Look here, Kansas City Southern ( NYSE: KSU ); this is a stock that works. Again, it is not just a one day move where, “Oh, this is a fakeout and the stock is going to be at $100.00 by Friday.” No, I think this move has legs.
Same thing here with Norfolk Southern ( NYSE: NSC ). I think this is a nice pop from a squeeze. I think this continues to move. Look at the volume; this is institutional buying. Institutions don’t put their money to work in a stock like this, get it up 4.8 percent and then the next day say, “You know what? I changed my mind, let’s go ahead and sell this.” That is not what they do. So this is an institutional footprint and we want to be there.
The same thing here on Union Pacific ( NYSE: UNP ). This is actually, in my view, the best pattern. A nice tight squeeze and then a total high volume breakout. Big, massive volume. Breakout here; closed near the top of the range. These are the types of moves that you want to see, particularly when you are looking at these on the weekly patterns. You don’t want to call this a big multi-year base because anything that pulls back 40 percent, that is not a base, that is just a big pullback. This really is the constructive part of the move right here. You get this little squeeze here (this is a weekly chart, remember this), so then this is gradually moving higher. Now, I am pretty sure this is an all-time high, if not it is within striking distance.
The bottom line is when I look at something like this I get excited. It is a railroad stock so they are not that big of movers anyway, which means you are probably going to get rich with this stock. But you are not going to go broke either. I think this is a really good trade right now. Nice volume to the upside here. I would look for at least another day on this. What I would do is, you are buying the stock right around here but then you have got to keep a little looser stop because of the way this stock has been trading. You have got to keep it a little bit below the 50-day moving average. If you give it about an $8.50 stop that should be enough to keep you in the trade even if the stock does reverse a little bit.
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