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KSU Extends 19th Century Legacy

01/30/20 04:31:28 PM
by Billy Williams

The market makes history while KSU looks to extend its history into the 21st century for smart traders

Security:   KSU
Position:   Buy

This week, the market continues its upward climb as the Bulls drive prices higher and the economy continues to grow. The U.S. job market remains strong and U.S. retail sales post solid gains to close out 2019 and, while the Fed says that economic growth was modest, optimism remains high as a trade agreement with China is made. As economic advancement is made the stock market trades into all-time record prices highs which fuels the optimism powering the economy as a kind of self-perpetuating cycle where one side feeds the other.

Still, as a trader, you have to wonder how long this can continue?

Experienced traders and investors have good reason to be skeptical. In dealing with the stock market, it's good to view it as a type of schizophrenic mental patient with a healthy dose of homicidal rage. Think Ted Bundy circa early 1970s, smiling but leaving you with a touch of unease that you can't quite put your finger on.

Figure 1. The weekly SPX has both the long-term and intermediate-term bullish trend firmly in place but may find itself extended and pulling back as a result.
Graphic provided by:
That said, the upward trend is moving higher on a healthy diet of jobs, growth, and earnings instead of the sugar high of false real estate sales, a la 2008-09. And, even if the market is behaving irrationally, it's important to remember that the market can continue to move higher, even if irrationally based, than you can remain solvent.

Bottom line, all indicators point higher and for the bullish trend to continue.

For aggressive traders, new breakouts on the back of the market's drive into new price highs are the way to go to ride the back of the Bulls. But, what if you remain a little skeptical of the market's long-term prospects?

A healthy respect for risk is a hallmark trait for traders who have been in this game for a long time and/or for traders who want to succeed in the long-term. But, the question that follows is how to trade the trend if you you believe that a pullback or correction may be around the corner?

Figure 2. The SPX daily chart also shows the Bulls in control, but the longer price extends itself, the more prudent traders need to be about a price reversal to test the trend's resolve.
Graphic provided by:
That's a solid question when you factor in that the market has traded higher for 6 weeks in a row along with the fact that we are now 10+ years into a bull market with no correction occurring. Though price points the way higher, it's both smart and wise to ask how to seek performance while minimizing risk, which is the job of every trader in the market.

Here are some thoughts: seek long-term growth in industries who have been in demand for a long time with solid future prospects and "pick your shots".

There is a reason why Warren Buffett is buying up railroads. Other than playing with them as a kid, established railroads are the go-to means of transporting goods across the country and are prohibitively expensive to compete with (there is not al ot of new railroad tracks being built across the U.S.).

Figure 3. KSU has broken out of a long price base and looks to go higher. Now is the time to start building a position as the stock looks to build on a legacy of over 130 years of performance.
Graphic provided by:
Kansas City Southern (KSU) sports a market cap of $17 billion, is ranked number one in its industry group, and recently broke out above its price base to a new 52-week high trading at $166.52 a share. Established in 1887, the company has been around for a long time, based in Kansas City, Missouri, and serves rail access from it's headquarters throughout the U.S., Canada, and Mexico.

Recently, KSU beat its 4th quarter earnings which lead to the breakout out of its base above the $157 buy point, signaling an entry.

The stock is set to go higher but if you missed the buy point then that's not necessarily a bad thing either. Rather than chase price, especially if you are cautious in the current market environment, you can wait for a pullback to the 50-day moving average or take a smaller position then scale in as the opportunity presents itself.

KSU has a legacy that extends back from the 19th century stretching into the age of smart phones and the internet, which is a legacy that not many companies can boast of. With such a long-term track record, you are presented with a short-term opportunity to seek out performance, but with the added benefit of holding a legacy stock for the long-term.

Billy Williams

Billy Williams has been trading the markets for 27 years, specializing in momentum trading with stocks and options.

E-mail address:

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