NEW BEARISH Plays

CSX Corp. - CSX - close: 19.58 change: +0.53

Stop Loss: 20.26
Target(s): 18.10, 16.25
Current Gain/Loss: unopened
Time Frame: 3 to 6 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
The transports have been underperforming for weeks. Then the railroad stocks were hammered lower on concerns that coal demand was falling thanks to two coal companies lowering estimates. Combine that the general concern of a slowing global economy and you can see why investors are not buying the transports.

The bounce in the Dow Jones Transportation index failed at technical resistance today (a Fib retracement). Meanwhile shares of CSX failed at round-number, psychological resistance at the $20.00 level. The oversold bounce may have run out of steam. This looks like a good spot to open bearish positions and limit our risk with a stop just over resistance at $20.00.

We want to open bearish positions tomorrow morning. Our first target is $18.10. Our second, much more aggressive target is $16.25, which could take a few weeks to get there.

Suggested Position: short CSX stock @ the open

- or -

buy the OCT $20 PUT (CSX1122V20) current ask $1.22

Annotated chart:

Entry on September 28 at $ xx.xx
Earnings Date 10/18/11 (confirmed)
Average Daily Volume = 12.4 million
Listed on September 27, 2011