Pullbacks to its 80-day moving average have been "buy" signals in the past for CSX
While the Nasdaq was enjoying its longest
winning streak in two years, the
Dow Jones Transportation Average (DJT) is pacing for a fifth straight loss -- and its worst week since the Brexit backlash of June 2016. Among the transports stocks that have taken a tumble this week is
CSX Corporation (NASDAQ:CSX), which is pacing for its worst week since January 2016, after the company on Tuesday offered lackluster expectations for
full-year profit growth. However, if recent history is any indicator, CSX stock could be a bargain for bullish traders right now. Below, we'll take a look at the shares, and outline why CSX options are attractively priced right now.
CSX stock has more than doubled from its early February 2016 lows, and hit an all-time high of $55.47 as recently as July 13. In the wake of the shares' post-earnings slide, CSX stock is now within one standard deviation of its 80-day moving average -- a "buy" signal in the past. According to Schaeffer's Senior Quantitative Analyst Rocky White, the last five times CSX stock pulled back to this trendline, the shares were positive 100% of the time one week later, with an average return of 2.7%. Looking out a month after a pullback, CSX was higher 80% of the time, averaging a gain of 6.62%. A similar rally from current prices -- the stock was last seen trading around $50.93 -- would put CSX around $54.30 -- within a chip-shot of record highs.
The equity's 14-day Relative Strength Index (RSI) now stands at a low 33 -- on the cusp of oversold territory, suggesting a short-term rebound could be in the cards. And for options traders expecting a near-term bounce, CSX's contracts look attractively priced. Specifically, the security's Schaeffer's Volatility Scorecard (SVS) of 87 indicates that CSX has handily exceeded options traders'
volatility expectations in the past year -- a boon for premium buyers.