The beauty of prolonged market uptrends is declining correlation. It is a “market of stocks” environment, where corrections take the form of sector rotation. While one leading sector is taking a breath from a recent spike, another that has been consolidating takes the lead and breaks out.
Quite a few railroad stocks have been quietly building new bases over the past couple months and the renewed strength in the overall market might be the catalyst that helps them to break out to new multi-year highs. Don’t forget that we are also in the midst of an earnings season. Quarterly reports will play a significant role and could be the proverbial tipping points that start, accelerate or end an existing trend.
Take a look at these three setups in the railroad industry: