A compelling chart pattern is emerging in this railroad stock
Source
With the Federal Open Market Committee's first meeting of the year this afternoon — followed by earnings from three of the "Magnificent Seven" — there's no shortage of near-term catalysts today. This being the case, railroad stocks most likely are not a focus for many investors today — or really at any time. But just because a sector, group or stock isn't among the most discussed, doesn't mean we should ignore a potential opportunity. Thus, when a compelling chart pattern emerges, it always finds its way onto our radar. CSX Corporation (CSX) is one such example. CSX just made a new 52-week high after reporting earnings last week. As is clear, the stock has remained in a back-and-forth trend since being hit hard earlier in the year. And, along the way, it has continued to make higher highs and higher lows. Getting a true sense of a stock's trend requires analyzing it across longer-term timeframes, as well. Zooming out to the weekly chart, we can see that CSX is now breaking out above an even larger bullish cup-and-handle pattern, which closely mirrors the daily setup. From this perspective, upside follow-through could soon put the early-2024 all-time highs back in the crosshairs. Needless to say, the presence of bullish patterns across two timeframes like this raises our conviction, compared with a setup that appears on only one. Further, sometimes it's helpful to display multiple patterns on the same chart, provided it doesn't become overly cluttered. In this case, doing so adds clarity by showing how both setups have developed over the past several months, while also highlighting the respective measured-move targets stemming from each breakout. On the daily timeframe, the shorter-term bullish pattern (shown in green) carries an upside target near 43. The larger cup-and-handle pattern (in blue), which has been forming for more than a year, points to a higher upside target near 48. The 33.5 area serves as a suggested stop-loss if one were to approach this as a trading idea, as a decisive move below that level would begin to challenge both bullish patterns. Best-case scenario, continued upside follow-through helps the stock move further away from its clear breakout zone just above 37, improving the overall risk-reward profile. Zooming out even further, it's clear that this move is also unfolding within a much longer, five-year trading range. Importantly, that range has developed around CSX's former highs, which could resolve as a long-term continuation pattern within an ongoing uptrend. The bottom line is that CSX has done a good job fighting back from last year's downturn. And now, the stock is attempting to break out of bullish patterns on both the daily and weekly timeframes, while also getting closer to potentially triggering an even larger bullish formation on the monthly chart. Taken together, this represents a constructive technical development for a railroad stock that many investors may soon start to notice. — Frank Cappelleri Founder: https://cappthesis.com DISCLOSURES: None. All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, or its parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL'S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.