One ‘pattern' I look for is strength in multiple stocks within the same sector. It is especially meaningful if the chart strength comes from well-received earnings reports by several members of a sector.
In the October 18th newsletter I focused on the Steel-sector stocks, and identified US Steel as being the strongest candidate for a stock position. (US Steel (X) hasn't announced earnings yet – they are due October 29th. But it has gained 12.4% since my 10/18 highlight in apparent anticipation of an encouraging earnings report).
The sector that currently stands out is another ‘basic industry' group of stocks. Basic industry stocks tend to be good movers in the early part of an economic cycle, and I've been watching all of them closely. It is the railroad stocks that win this week's prize.
Canadian National Railway (CNI) has jumped 7-8% since a breakout 14 trading days ago of the 103 level. Back in July, CNI beat estimates by $0.04, on 4.8% higher revenue. Two days ago, CNI beat estimates by $0.10 on 8% higher revenue. CNI has also announced a 2-1 stock split, payable 11/29. The stock is showing strong accumulation.
Norfolk Southern (NSC) is up 9.8% from a breakout of the 80 level. On Wednesday, it beat estimates by $0.14 on 4.9% higher revenue. Like CNI, NSC started its up-move about a week or two before the earnings announcement.
Canadian Pacific Railway (CP) also announced on Wednesday, beating estimates by $0.03 on 8.6% higher revenue. CP has just broken above previous resistance at 140 to set an all-time high.
My pick of the lot was Kansas City Southern, what I think of as the ‘Southern Belle' of the group. In my October 21st newsletter, I focused on how KSU responded to its October 18th earnings report that was well received. KSU was at 117.35 at that point. I also covered the KSU's strong seasonal pattern, the strong track record of gains in previous years over the next few months.
Since then, KSU has gained another 6.1%.
In the 10/21 newsletter I said KSU could be traded as a stock-only trade. But I analyzed a specific option trade targeting a 20% profit within a couple of weeks, to keep it a high probability trade. I am telling readers today to close the trade and take the almost-20% profit, only 4 days into the trade. I may reenter the trade if KSU pulls back slightly and then stages a rebound.
In the week since KSU announced, the stock has continued to gain on accumulation that is most likely from institutions. I'll be watching the other railroad stocks to see if they follow through similarly.
Of course, there's much more you need to know and many more stocks you can capitalize upon each and every day. To find out more, type in www.markettamer.com/seasonal-forecaster
Copyright (C) 2013 Stock & Options Training LLC
Unless indicated otherwise, at the time of this writing, the author has no positions in any of the above-mentioned securities.
Gregg Harris is the Chief Technical Strategist at MarketTamer.com with extensive experience in the financial sector.
Gregg started out as an Engineer and brings a rigorous thinking to his financial research. Gregg's passion for finance resulted in the creation of a real-time quote system and his work has been featured nationally in publications, such as the Investment Guide magazine.
As an avid researcher, Gregg concentrates on leveraging what institutional and big money players are doing to move the market and create seasonal trend patterns. Using custom research tools, Gregg identifies stocks that are optimal for stock and options traders to exploit these trends and find the tailwinds that can propel stocks to levels that are hidden to the average trader.
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