DataTrader: Are the Rails Ready to Rally?
Buried among the industrial stocks are a pair of railroad companies that have begun to pullback in bull market territory.
Shares of Union Pacific Corp (UNP) pulled back by well over 3%, closing at their lowest level in a week. The stock is close to technically oversold territory and could easily reach those levels before the end of the week if sellers remain persistent.
Trading in Norfolk Southern Corp (NSC) is almost a mirror image of what we see in Union Pacific. NSC topped out in late October after a month-long rally took the stock higher by more than 25%. An initial sell-off after those new intermediate term highs were reached took shares of NSC lower by more than 2% over the next three days. Note that this pullback and rally in NSC occurred without the stock ever falling into technically oversold territory.
Should railroad stocks like Union Pacific and Norfolk Southern continue to experience selling, any oversold conditions could be hard for traders sitting on the sideslines to resist. Previous closes in oversold territory, especially as part of multi-day declines, have been met with strong rallies in recent weeks and months. Witness the oversold rallies in the second half of August and September, which led to short, sharp moves higher in both stocks.
Heading into trading on Thursday, both UNP and NSC have significant short term positive edges. Again, additional selling will likely increase these edges.
Quantified data and research on stocks like UNP and NSC is available each evening after the market close. To learn more, click here.
David Penn is Editor in Chief of TradingMarkets.com