From the outside looking in, it’s tough to imagine a positive scenario materializing in the near term for freight rail network CSX Corp (CSX). Primarily hauling bulk commodities such as coal, agricultural products and minerals, the company is as far removed from glamorous as one can get. At the same time, the business represents a central component of the broader economy.
As such, CSX stock should be insulated from wild volatility. Unfortunately, so far this year, the equity has suffered a steep loss of nearly 14%. To put this figure into perspective, the benchmark S&P 500 index is down only 6.06% during the same frame. Even the Nasdaq Composite index has fared better, losing just under 10%.
Triggering anxieties over the enterprise is its surrounding unusual options activity. Specifically, last Friday, the major transaction that stood out was a sold $27.50 call expiring Nov. 21, 2025. Volume reached 268 contracts against an open interest reading of only 8 contracts, suggesting brewing skepticism of a robust recovery.
More than likely, these are covered calls. Should CSX stock rise above the strike price by more than the premium that those on the debit side paid for these contracts, the sellers will essentially exit the railway company at a price they deem acceptable. If the security never reaches the assignment threshold, then the credit sellers receive both income and get to hold onto their shares.
It might turn out to be a win-win situation for the risk underwriters. For everyone else, CSX stock may represent a proxy for the circumstances that can go wrong.
For example, with competitor Union Pacific (UNP) producing a rather disappointing first-quarter earnings report, investors aren’t exactly in a hurry to scoop up railway stocks. Combined with rising anxiety over a potential recession, the market seeks quality names, not speculative affairs.
Still, it might not be time to give up on CSX stock just yet.
Why the Inclusion of CSX Stock in the Sell Signal Screener Deserves an Asterisk
As I’ve pointed out in the past, I’m a big fan of Barchart Screeners, an excellent framework to jumpstart one’s research by filtering securities through thematic or strategic considerations. One screener, though, tends to catch the eye due to its somewhat controversial label: Long Term 100% Sell Signals.
A self-explanatory screener, Sell Signals represent securities that have incurred the unfortunate label of 100% Overall Sell, which is the combination of all 13 technical indicators that make up the Barchart Opinion index. Having browsed through all these names, I can safely tell you that most of these securities are indeed junk.
However, some just might pass the sniff test, which brings us to CSX, a company that dubiously made the list. It doesn’t seem right that such a stalwart finds itself in this ignominious position — and the facts support such a sentiment.
Of course, to validate this argument, one cannot simply compare the prices of disparate companies to each other. Price being a boundless, continuous signal, it has no meaning in and of itself. Rather, it’s simply a scalar expression. Thus, to make more effective comparisons, there needs to be a way for all securities to speak a universal language.
Thanks to an intensive mathematical process called abstraction, I was able to compress all price activity of CSX stock into a quasi-binary code with 33 strings. This allows me not to assess the price of the security but rather its behavioral state transitions.
To put it another way, behaviors can be defined and categorized — and as such, they can also be predicted. Unlike price, behaviors have pivot points that can potentially be identified, yielding superior entry and exit points.
One key observation that I noticed was that CSX stock is currently riding a “2-8” sequence: two weeks of upside interspersed with eight weeks of downside. This is a fairly rare phenomenon, having only occurred 19 times in the trailing decade. Not only that, in 63.2% of cases, CSX popped higher in the following week.
A Genuine Case for Contrarianism
Another curious factor is that other behavioral sequences fail to generate a materially positive probability. For example, the 3-7 sequence — three weeks up, seven weeks down — only features an upside probability of 36.4%.
About the only success ratio that’s more favorable than the 2-8 is the 1-9 — and that has only happened one time, resolving to the upside. Yes, it just might be that CSX stock is so bad that it’s good.
Plus, there’s some fundamental justification for the bullishness. According to CSX CEO Joseph Hinrichs, there’s been a significant increase in steel production. If so, this is not just contrarianism for its own sake. There very well could be something here.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
