CSX Corporation: The Bull Run in CSX Stock has Only Begun

CSX StockCSX Stock: Trending Higher

I am bullish on CSX Corporation (NASDAQ:CSX) stock, and my views are based on the CSX stock price chart. As an analyst, I use price charts as a tool to identify and select potential investments. Price charts give me the required signals I seek in order to discern a trend and set the appropriate strategy. Being on the right side of a trend is the main ingredient to a successful trading regime. 

My process begins by looking at numerous charts on different time scales because different time scales serve to support my view. Longer-term charts, which serve to smooth out signals, help illustrate the longer-term trend. The same long-term time frame contains less noise and fewer onerous signals, compared to the same chart with a shorter-term time frame. My strategy requires that multiple signals need to support the same bias. More emphasis is placed on signals, if more than one time frame supports it.

The following CSX stock chart illustrates this ticker’s adherence to a technical pullback.


Chart courtesy of StockCharts.com

Fibonacci retracement numbers (highlighted in green) are a very popular tool used by many technical traders.  This tool is used to identify counter-trend price objectives. In theory, when a stock pulls back from a primary trend, shares will retrace approximately 50-62% of the primary move. This zone usually offers support, as traders will be eyeing this area as one in which to enter long positions or cover short positions.

CSX stock conformed to the retracement numbers perfectly. The blue box is what traders refer to as trading into the box. When shares fall into the box, it signals that traders should cover their short positions and start building a long position. This technique was effective in spotting a bottom in the share price as the 50% Fibonacci retracement stopped the selling dead in its tracks.

The precision of this pullback gives me reason to believe that technical signals will work well with CSX stock. This will set up the groundwork for an appropriate trading strategy that will define my risk and reward.

The following CSX stock chart illustrates a development that supports further bullish pressure.


Chart courtesy of StockCharts.com

On the chart, you will notice the lower panel labeled “MACD.” Moving average convergence divergence (MACD) is a simple and effective trend-following momentum indicator. Signal line crossings are used to distinguish between bullish and bearish signals.

In March 2016, CSX stock generated a “sell” signal when the monthly MACD signal crossed in a bearish manner. This signal effectively halted any further sustained gains in the price, as a selloff quickly developed.

This same signal is now converging and a bullish MACD cross is set to develop in the coming months. This would serve to confirm the bullish premise and would also confirm the idea that bullish tailwinds driving share prices higher are still in the early stages of this cycle.

The following CSX stock chart illustrates a bullish short-term development.


Chart courtesy of StockCharts.com

In May 2016, CSX stock generated a golden cross. A golden cross is a bullish momentum indicator that is produced when a faster 50-day moving average, highlighted in blue, crosses above a slower 200-day moving average, highlighted in red. This signal is used specifically to suggest that a bull market is on the horizon. I always found it wise never to trade against this signal. I could only warrant holding a long or neutral position in the face of this signal.

Shortly after the golden cross, the CSX stock price action became significantly bullish. An impulse wave (highlighted in green) developed in July that was followed up by a consolidation wave (highlighted in purple). Bullish stock charts are littered with this type of price action. This consolidation wave has just been broken to the upside and another impulse wave is in development. If we assume that the consolidation wave marks a midpoint, then the projected price of this impulse wave is $32.00.

The Bottom Line on CSX Stock

The charts above illustrate the developmental process I use to create a trading bias. Based on the evidence provided, my bias is bullish in CSX stock. This trend is still early in its life cycle, thus my bias will continue to remain bullish until the CSX stock chart begins painting a picture to suggest otherwise.