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07/10/2012 9:00 am EST
Greg Harmon of Dragonfly Capital outlines several trading ideas on a railroad company.
Norfolk Southern (NSC) is breaking short-term resistance at 71.85 with a bullish engulfing candle Friday, and testing the downward-sloping longer-term resistance. This cup and handle trigger carries a target of 81.65.
It has a Relative Strength Index (RSI) that is bullish and rising with a Moving Average Convergence Divergence indicator (MACD) that is positive to support further upside.
There is resistance higher at 74 and 75.40, followed by 77.40. Above that are new all-time highs. The three-box reversal point and figure chart carries a current price objective of 51, suggesting a range trade, but a print at 78 would change that to a price objective of 86. Support is found lower at 71 and 70.10, followed by 68.40 and 67.25, before 65.10, 64, and 63.10.
Here are four trading ideas for the stock:
- Trade Idea 1: Enter long on a move over 72.30 with a $1.35 trailing stop.
- Trade Idea 2: Buy the July 72.5 Calls on a move over 72.30. These were offered at 90 cents late Friday.
- Trade Idea 3: Buy the August 72.5 Calls on a move over 72.30. These were offered at $1.90 late Friday.
- Trade Idea 4: Buy the August 72.50/75 Call Spread Risk Reversal, selling the August 67.50 Put on a move over 72.30. These combos were offered at 35 cents late Friday.
Greg Harmon can be found at Dragonfly Capital.
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