Sunday, September 7, 2014

CP Canadian Pacific Railway Weekly Chart Overbot Rising Wedge Negative Divergence Price Extended Keystone XL Pipeline Discussion

President Obama refuses to approve the Keystone XL pipeline project for the last few years despite extensive environmental and other studies that approve the project. The president does not approve Keystone XL since the environmentalists are typically democrats and he wants to maintain these voters in the democratic fold. Shamefully, however, the middle class and poor desperately need jobs and the pipeline approval would bring high-paying jobs to the Midwest and support thousands of other jobs. The president's allegiance is with the democratic-leaning and liberal major cities such as New York and Los Angeles and he has little interest in the heartland that is mainly made up of republicans. The president says he will not act on Keystone until after the election but he changes his mind like the weather so perhaps he will surprise everyone. Nonetheless, Keystone XL may be approved before year's end.

The rails have been on fire in recent months. There was a hint that the president would approve the Keystone XL pipeline project earlier this year as one of the major environmental studies finished and said the project is not hazardous to the environment. President Obama, however, placed the kabash on this and refuses to approve the pipeline. The rails were dropping on the Keystone approval possibility but once it was squashed by the president the railroads catapult higher since more oil must be transported by train. Note that the train accidents are increasing resulting in fiery crashes due to hauling far more volatile oil. President Obama's buddy Warren Buffet of BRKA and BRKB own rails so it is one rich buddy taking care of another rich buddy. The elite live a different life than you.

With elections now only about 8 weeks away, two months, the political atmosphere becomes more charged. The republicans may take over the Senate (which may be contributing to the stock market rally recently) so the president may pull a rabbit out of the hat before the election by approving the Keystone XL pipeline to goose enthusiasm and have voters thinking that the democratic incumbents are not so bad after all and they can be reelected. Of course this is conjecture but you must think like a politician, or criminal, same difference, to be a good trader. If the president allows the Keystone XL pipeline project to proceed, the railroads will tank. Even if he does not approve the project before the election, the approval is likely on tap for the months ahead and may occur by December.

The rail stocks are running nearly parabolic. The CP chart above shows a red rising wedge, overbot conditions and negative divergence that forecast a spank down in price. The MACD, however, remains long and strong so after the initial spank down in the weekly time frame, price will come up for another look at these levels, then likely roll over since the MACD will go neggie d as well. So a short can be played for the initial pull back but for such a momo move over the last few months the trade is only for experienced nimble short traders. When price returns higher say in one to three weeks that will likely be a far better place to start scaling in to a short position. Of course if the president announces Keystone XL, CP will immediately collapse. Canadian Pacific is the rail stock most dramatically negatively impacted if Keystone XL is approved just as it has benefited greatly by the president refusing to approve the project. Other rails, however would venture lower in sympathy.

CSX is the same sick chart as above only its MACD line is already neggie d so it can be shorted now. CNI has gone parabolic and follows the same technical analysis as CP. NSC, mainly a coal hauler, is already negatively diverged across all indicators like CSX so that one can be faded now. The tight standard deviation bands (purple) for CP above squeezed out two strong moves higher. Price needs to move down to the middle band at 181 and rising at a minimum and the lower band at 151 and rising is in play.

Thus, keep an ear open for any news concerning Keystone XL pipeline. CSX and NSC can be scaled into on the short side going forward and CP and CNI can be viewed from the short side in a couple or three weeks. Whenever the president decides to approve the Keystone XL pipeline, the rails will collapse, receiving extra juice from the negative chart set-ups discussed, and CP will be bludgeoned more than the others. Until then, playing the rails on the long side is like picking up nickels in front of a bulldozer. If you have strong profits in any rail position, take half off and begin scaling out to exit within the next month or so. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.

Note Added 9:14 AM on 9/9/14: CP begins the week losing -0.8% to 205.70.

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