Canadian National Railway Plunges 3.9%, What’s Brewing in the Railroad Sector?

Summary
• CNI’s intraday price tumbled 3.9% to $96.46, nearing its 52-week low of $91.65
• Analyst downgrades and guidance cuts from CN Rail triggered a sector-wide selloff
• Options activity spiked, with 620 contracts traded for the August 95 put

Canadian National Railway (CNI) is under fire, with its stock price tumbling over 3.9% in midday trading on July 23, 2025. The sell-off follows a wave of analyst downgrades and a revised earnings outlook from Canadian National Railway (CNR), its Canadian counterpart. As the railroad sector grapples with trade uncertainty and regulatory scrutiny, investors are recalibrating their bets. The stock’s technical breakdown and bearish options activity signal a critical juncture for the 52-week low-bound name.

Analyst Downgrades and Guidance Cuts Trigger Panic
Canadian National Railway’s 3.9% intraday plunge is directly tied to a cascade of analyst downgrades and revised guidance from CN Rail (CNR). Major firms like J.P. Morgan, National Bank of Canada, and Scotiabank slashed price targets and ratings after CN Rail’s second-quarter results—while slightly below expectations—failed to assuage concerns over trade uncertainty and tariff-related headwinds. The company’s withdrawal of its 2025 guidance, coupled with a revised 2026 EPS forecast, signaled to investors that growth is no longer assured. Analysts now project mid-to-high single-digit EPS growth, far below the prior 10-15% target. The bearish sentiment is compounded by a weakened RTM outlook, with Q3 volumes down 6.5% year-over-year, and long-term targets abandoned due to macroeconomic volatility.

Railroad Sector Volatility Intensifies as M&A Fears Resurface
The railroad sector is in turmoil as Union Pacific (UNP) and Norfolk Southern (NS) merger rumors reignite fears of regulatory backlash and market concentration. While CNI’s 3.9% drop outpaces UNP’s modest 0.6% decline, the sector-wide selloff underscores shared vulnerabilities. BNSF and CSX have shown relative resilience, but CNI’s exposure to intermodal and coal freight—segments likely to face margin compression in a post-merger environment—amplifies its risk. The sector’s mixed performance highlights divergent operational strengths and regulatory exposure, with CNI’s bearish technicals and analyst sentiment making it a bellwether for sector-wide uncertainty.

Bearish Playbook: Capitalizing on CNI’s Technical Breakdown and Options Liquidity
• 200-day MA: $104.06 (well below current price)
• RSI: 35.85 (oversold territory)
• MACD: -0.836 (bearish divergence)
• Bollinger Bands: CNI is trading near its 99.14 lower band, signaling extreme volatility

CNI’s technical breakdown and bearish options activity present a compelling short-term opportunity. The stock is trading near its 52-week low of $91.65, with RSI entering oversold territory and MACD showing bearish divergence. The most liquid and strategically positioned options are the CNI20250815P95 and CNI20250919P95 puts. These contracts offer high leverage (63.92% and 36.74%) and moderate delta (-0.4088 and -0.4233), positioning them to capitalize on further downside while retaining sensitivity to price swings. The 95-strike puts also boast reasonable implied volatility (20.11% and 20.76%) and high turnover ($23,242 and $26,819), ensuring liquidity for entry and exit.

• CNI20250815P95
- Type: Put
- Strike: 95
- Expiration: 2025-08-15
- IV: 20.11% (moderate)
- Leverage: 63.92% (high)
- Delta: -0.4088 (moderate bearish sensitivity)
- Theta: -0.0061 (low time decay)
- Gamma: 0.0785 (high sensitivity to price changes)
- Turnover: $23,242
This contract is ideal for capitalizing on a short-term decline, with its high gamma ensuring it gains value rapidly if CNI breaks below key support. A 5% downside scenario (targeting $91.05) would yield a payoff of $3.95 per contract.

• CNI20250919P95
- Type: Put
- Strike: 95
- Expiration: 2025-09-19
- IV: 20.76% (moderate)
- Leverage: 36.74% (high)
- Delta: -0.4233 (moderate bearish sensitivity)
- Theta: -0.0114 (moderate time decay)
- Gamma: 0.0488 (reasonable sensitivity to price changes)
- Turnover: $26,819
This longer-dated option offers more time for the bearish thesis to play out, with its 36.74% leverage amplifying potential returns. A 5% downside would yield a $3.95 payoff, with the added benefit of reduced time decay compared to shorter-term puts.

If CNI breaks below $95, the CNI20250815P95 offers the most aggressive short-side potential. For a measured approach, the CNI20250919P95 balances time and leverage to capture a prolonged selloff.

Backtest Canadian National Railway Stock Performance
The CNA's performance after an intraday plunge of at least -4% shows mixed short-term results but a positive long-term outlook. The 3-Day win rate is 54.88%, the 10-Day win rate is 53.37%, and the 30-Day win rate is 50.67%, indicating a higher probability of positive returns in the short term. However, the maximum return during the backtest period was only 1.02%, suggesting that while there is a good chance of recovery, the potential for large gains is limited.

Act Now as CNI Faces a Critical Crossroads
CNI’s sharp decline has created a high-conviction bearish setup, driven by sector-wide merger fears and technical breakdowns. With the stock near its 52-week low and key support levels in play, investors should monitor the $95 and $91.65 levels for further directional cues. The sector leader Union Pacific’s -0.12% move underscores the fragility of railroad valuations in a regulatory-sensitive environment. Aggressive traders may want to consider the CNI20250815P95 for immediate downside exposure, while longer-term bearish positions could target the CNI20250919P95. Watch for a breakdown below $95 or a reversal in the UP/NS merger narrative to determine next steps.