Corrections Corp Of America: This is Why CXW Stock Is Going Insane

CXW StockCXW Stock Surged After Trump Victory

Americans have voted, and Donald Trump is going to be the next president of the United States. In the late hours of election night, as many investors began to assume Trump was going to be the victor, markets began to sell off worldwide.

The S&P 500 index was down 120 points off of its high, and everyone was expecting the worst outcome on Wednesday morning. These fears quickly subsided, and the market has reversed what could have been a disastrous trading day.

Not all was gloomy, as some companies were already set to benefit from having the likes of Trump as commander-in-chief. Corrections Corp Of America (NYSE:CXW) stock is one of those names, and it is benefiting greatly, as it was up 44.37% on Wednesday.

Corrections Corp Of America is engaged in owning, operating, and managing prisons for the federal government.

The reason CXW stock is up following the election is that the new president of the United States has vowed to curb the crime rate and increase policing of crime-infested neighborhoods. Trump has expressed specific concern about communities  that are experiencing high murder rates, such as Chicago. Investors are speculating that, based on Trump’s views,  private prisons will be beneficiaries of his campaign promises. This rhetoric has caused a great deal of speculation in CXW stock, and it is the primary driver that pushed it up 44.37% on Wednesday.

The following CXW stock chart can shed some light on the current surge higher in price.

cxw

Chart courtesy of StockCharts.com

In August, the federal government announced that it was going to phase out the use of private prisons. This news sent CXW shares plunging lower, and support wasn’t found until CXW stock traded below $13.00 on an intra-day basis. Investors lost nearly 60% of their value in this investment, as the future began to look bleak as credit agencies began to downgrade Correction Corp Of America’s debt.

The recent surge higher in price has been phenomenal, but it has only served to test resistance that stood as a previous area of support.

In order for this investment to become more constructive, certain price actions will be needed in order to act as stepping stone—or a setup, as most traders refer to it. The current surge higher in price could be constituted as a flagpole, and traders would be waiting for a constructive pattern that could serve as a flag against which they could set up a trading strategy.

Last Words on CXW Stock

At this current juncture, I would just sit back and let cooler heads prevail. I believe that the current surge in CXW stock was caused by sheer speculation, and I would require more price data in order to set up an appropriate trading strategy.