Old Dominion Freight Chugs Along

Feb 10, 2008: 1:55 PM CST

Old Dominion Freight Line (ODFL) recently experienced a major momentum impulse price move up, which resolved a growing positive divergence and has set up a Sweet Spot trade. Let’s see what this amazing stock has done in 2008:

Notice that as price was experiencing resistance around $25.50, the momentum oscillator was showing positive conditions through a dual divergence (in highs and lows in relation to price).

The significant new momentum high indicates that odds favor higher prices yet to come (though a pullback retracement seems imminent).

The stock should have strong support about the $25 to $27 level due to prior resistance (becoming support) and moving average structure.

Let’s see the weekly chart as well:

The recent strong momentum divergence is far clearer on the weekly chart. Notice that as price bottomed, the momentum oscillator made higher lows. The resolution was fierce.

Why might this have happened?

Warren Buffett has been famously buying railroad stocks.

According to an article by David Smith at The Motley Fool (among other resources), “In his widely read letter to Berkshire shareholders this year, Buffett said, “We continue … to need elephants in order for us to use Berkshire’s flood of incoming cash.” We now know that the other two pachyderms whose shares Buffett was buying were Union Pacific (NYSE: UNP) and Norfolk Southern (NYSE: NSC).”

Other stocks (like Old Dominion Freight Line) have been rising in sympathy or tandem. Recall that some of the best trades come along side major news events, rather than trading the news events themselves.

Traders, remember that Warren Buffett is a long-term fundamental investor, and while the current railroad stocks are showing strength, don’t expect you can make a fortune quickly on the short-term fluctuations and ripples caused by Buffett’s “stone” being dropped in the investment waters.

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One Response to “Old Dominion Freight Chugs Along”

  1. Stock Market » Old Dominion Freight Chugs Along Says:

    […] Corey Rosenbloom wrote an interesting post today on Old Dominion Freight Chugs AlongHere’s a quick excerptTraders, remember that Warren Buffett is a long-term fundamental investor, and while the current railroad stocks are showing strength, don’t expect you can make a fortune quickly on the short-term fluctuations and ripples caused by … […]