Are Railroads Still Rolling In Profits?


Just a reminder, I am the opening speaker kicking off Chartcon 2018 on Friday morning, August 10th! DON'T BE LATE! I hope to be one of the strongest presentations to kick this off. While I love the SCTR, my presentation this year will be a totally different method of simply finding great set ups based on some of the biggest names in Technical Analysis. I am up against some fabulous speakers so I have my work cut out for me.  

Seriously, when do you get to hear published authors Martin Pring, David Keller, Greg Morris, Alexander Elder, John Murphy, Arthur Hill, and Greg as just part of the roster? People have crossed the world to listen to some of these presenters. I could list the full speaking roster here but its unbelievable! Follow this link to check out the entire list. Register right away so you get all of the information regarding how to optimize the software and the Chartcon guide.  

For my Chartwatchers article this week, I want to check in on American freight. The price of fuel has been accelerating, so I thought I would look in on the railroads to see if investors are bidding the stocks down as cost increases flow through to them. We know crude oil has been holding up around $70 while Gasoline and Diesel are living in the top right corner of their charts.

Railways also risk having pressure from their customers as they move a lot of stuff that has been influenced by tariffs.  Railways move iron ore, which then becomes raw steel for the fabrication of the vast size range of agriculture equipment and then they move the finished products. In speaking with a local farmer, he mentioned agriculture equipment costs are jumping. 

In my Final Bar video recording on Thursday, August 2nd, I noticed that CAT and BA were near the bottom of the Dow 30 list in terms of price action calculated by the SCTR. CAT closed Friday with an SCTR at 19 and BA 55. Deere and Co. (DE) which is not in the Dow, closed Friday with an SCTR at 25. Ouch!

On a personal note, I am rolling through the oil fields of Canada this weekend. With the Duvernay and Montney oilfields picking up in activity, the Canadian oil patch is starting to speed up. In the USA, the oil stocks have also been improving as the Permian and Eagleford fields are all the rage. 

Railways haul the steel for the oil patch that is used in pipe, compressors stations, pump jacks, drilling rigs, valves, engines, heavy haul trucks, and skid decks for portable housing and mobile offices. 

The use of steel and aluminum is also prevalent in automotive and airplane manufacturing which is well known.

So with fuel and tariffs at the heart of the manufacturing industries, how are the railways holding up? As Charles Dow noted a hundred years ago, both the manufacturing and the transportation stocks should move up together. 

The list below shows all of the railways with an SCTR ranking holding up really well. Every railroad has an SCTR better than 70, which is excellent. The list shows the price improvement over the last month. WOW! 

If we look at the weakest performer which is still strong, KSU suggests no need to worry yet. This is the lowest ranked railway and the price just broke out to new highs. If KSU lost support at the 40 week moving average at $108, that might indicate a whipsaw or failed breakout. That would be noteworthy but currently the rails are rolling. If the rest are better than that, thats crazy good! I'll let you check out the charts individually to decide is the SCTR is accurate! (Hint - extremely!)

Below is the recording of The Final Bar show I mentioned above. As Apple moved above the trillion dollar market cap, the $INDU chart closed down on the day. This led into a discussion about examining the underlying price action and how to quickly create index chartlists with just a few keystrokes. 

Below is the recording of The Canadian Technician Video. This video shows some great examples of how breadth breaks down before the markets weaken. 

Below is the Commodities Countdown video that walks through the concerns in the index set up right now. 

Don't forget to register for Chartcon 2018.

If you are missing intermarket signals in the market, follow me on Twitter and check out my Vimeo Channel often. Bookmark it for easy access!

Good trading,
Greg Schnell, CMT, MFTA
Senior Technical Analyst,
Author, Stock Charts for Dummies

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Commodities Countdown and The Canadian Technician

Greg Schnell
About the author: , CMT, is a Senior Technical Analyst at specializing in intermarket and commodities analysis. He is also the co-author of Stock Charts For Dummies (Wiley, 2018). Based in Calgary, Greg is a board member of the Canadian Society of Technical Analysts (CSTA) and the chairman of the CSTA Calgary chapter. He is an active member of both the CMT Association and the International Federation of Technical Analysts (IFTA). Learn More
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