I traveled on the Long Island Railroad into Manhattan and then rode the subway downtown to Wall Street for 25+ years. 

I never had to endure an accident or any issues, so I can imagine how terrifying the recent derailment must have been.

A 149-car, 9,000-foot-long train with toxic chemicals derailment sounds terrifying.

NSC is out of the woods, and not just because health risks remain unknown. Other factors may hold the stock down, as well.

Today, we’ll take a look and consider a trade.

Damages to NSC From Derailment

The speculation is that NSC will incur Q1 charges in the range of $50-$100 million. NSC is self-insured for up to $75 million, with coverage above that up to roughly $800 million. That should be more than enough to eliminate any meaningful financial risk. 

It will not be the derailment that will pressure NSC’s stock, but rather a global recession

You see, railroads really are like the little train who could, one of my bedtime favorites for my kids. 

They don’t provide much growth or momentum for traders, but they do provide profits, especially when the economy is growing. They are a classic cyclical stock. 

Notice the chart below showing US GDP.. When the economy is growing, railroad stocks are humming, but when the economy is slowing, their stocks retreat. 

Unlike our Federal Reserve. I see a hard-landing recession coming, so I think we should see NSC make a new low for the cycle.

Now, a bounce in the short-term is certainly possible and a good short-term play looks to be buying a new low and looking for a bounce back up to the $230 area. 

Beyond that, you may want to set-up a put spread looking for a significant correction in NSC and the overall market starting this summer. 

Live and Trade With Passion My Friend,

Griff