CSX Corp. - CSX - close: 22.49

Company Info

Why We Like It:
Six to eight weeks ago investors were worried that the U.S. was on the verge of another recession. The flow of economic data since then, while uneven, is suggesting that the U.S. is edging further away from another slow down. Growth remains tepid but it is growth. One sign of this improvement has been a slow climb in railroad traffic.

Railroads as a group have been showing relative strength the last couple of days. CSX outperformed on Friday with a +3.6% gain and a breakout past its 100-dma and the exponential 200-dma. This looks like a new bullish entry point. Of course given our long-term time frame you don't have to rush out and buy calls immediately. You could wait for a dip back into the $22-21 zone, especially if stocks pull back.

I do see potential resistance at the $24.00 level and the $26.75-27.00 zone. Yet the Point & Figure chart for CSX is bullish with a $33.50 target. You can see the bullish breakout on the P&F chart below (from StockCharts.com). I am setting our long-term target at $29.75.

My biggest worry with any new bullish trade is Europe. If the EU is unable to solve their problems, then the European region will fall into deep recession, which will then slow down the global economy.

You can choose the 2013 or 2014 call.

- Suggested Positions -
NOV 14, 2011 - entry price on CSX @ --.--, option @ -.--
symbol: CSX1319A25 2013 JAN $25 call - current bid/ask $ 2.31/ 2.36

- or -

NOV 14, 2011 - entry price on CSX @ --.--, option @ -.--
symbol: CSX1418A25 2014 JAN $25 call - current bid/ask $ 3.20/ 3.45

Chart of CSX:

P&F Chart of CSX:

Weekly Chart of CSX:

Current Target: $29.75
Current Stop loss: 19.75
Play Entered on: 11/14/11
Originally listed in the New Plays 11/12/11