The railroad sector is starting to show signs of getting tired. It has been one of the sectors that have supported the broader averages over the last several months. But last week, the sector had its first significant and steepest sell-off in quite a while. Another item that has me thinking that it is more than a pullback is the increased volume associated with the sell-off.

Railroad Sector

Looking a little deeper, I have also noticed that there are several stocks within the industry group that are in the same topping pattern. Union Pacific (UNP) sold off most of last week, the only exception being Friday. I feel that the up-day UNP had was assisted by the strong performance of the broader averages. Also, the volume on Friday was anemic compared to the previous down days of the week. If the Fridayââ,¬â"¢s lows are taken out, I feel another leg down is imminent.

Union Pacific

As I mentioned, there are several other railroad stocks that I noticed are in a similar situation. Burlington Northern Santa Fe (BNI) broke support from early February and tried a small bounce on less than average volume.

Burlington Northern Santa Fe

Another example is FreightCar America (RAIL) with the same pattern.

FreightCar America

With the industry group starting to sell off and several stocks within the industry group breaking support, the odds are rolling in our favor. This is exactly what I look for to tilt the playing field in my direction.

One final note, keep an eye on the direction of interest rates on the 10-year Treasuries. It seems as though every up-tick in the yield is putting more and more pressure on equities.

Disclaimer
The article submitted to the Tiger Shark Publishing LLC is presented for informational purposes only and should not be construed as a solicitation to buy or sell securities or securities derivatives of any kind, nor serve as any type of investment advice or strategies. Actual results may differ greatly from expressed opinion. The author expresses a personal opinion and will not assume any responsibilities of the action of the reader.

Tom Incorvia is a swing trader with 18 years of experience in the financial markets.  E-mail him at tincorvia@gmail.com.