Kansas City Southern is Ready to Drive Higher

Over the weekend as the world was coming to an end, I noted that there were some bright spots, as in the tweet above. One railroad has such a good looking chart that it bears examining further, Kansas City Southern, $KSU. This is a textbook long set up. The stock broke out of a long ascending triangle with volume and made a new high. Since then it is now retesting the break out level at 74.65 and held, restarting a move higher Monday. Should it continue to hold support the target from the triangle break out is 87.75. The Relative Strength Index (RSI) is bullish and turning

back higher with a Moving Average Convergence Divergence (MACD) indicator that is breaking the zero line but at a very shallow angle. You can hop on this now with a $2 stop or wait for it to move a bit higher for firmer confirmation. Based on the run higher into the consolidation you should expect about 2 months for the full move to play out. Another way to play that would be to buy the September 75/85 Call Spread. This gives 3 months for the move to occur and was offered at just over $4 late Monday. A 2.5 to 1 reward to risk ratio. You can take on some risk and further reduce the cost of that call spread and improve the reward potential.

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The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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