CNI Plunges 3.57% Amid Analyst Upgrades: What's Fueling the Selloff?

Summary
• Canadian National Railway (CNI) slumps 3.57% to $97.01, its worst intraday drop since 2023.
• Vertical Research upgrades CNI to 'strong-buy,' yet the stock trades below its 52-week low of $90.74.
• Options activity surges with 654,023 shares traded, signaling heightened volatility ahead of the January 16 expiration.
• The stock’s 200-day moving average at $98.13 and Bollinger Bands suggest a critical support test at $96.78.
Canadian National Railway’s sharp decline defies recent analyst optimism, with technical indicators and options data painting a complex picture of bearish momentum and speculative positioning. Traders are now weighing whether this selloff is a buying opportunity or a warning sign for the railroad giant.

Analyst Optimism Contrasts with Bearish Price Action
Despite a 'strong-buy' upgrade from Vertical Research and a $153.20 average price target from 20 analysts, CNI’s price action tells a different story. The stock opened at $100.98 and plunged to an intraday low of $96.93, erasing $3.6 billion in market cap. This divergence suggests short-term traders are capitalizing on the upgrade to lock in profits or hedge against sector-wide weakness. The 52-week low at $90.74 looms as a critical psychological barrier, with the RSI at 60.13 and MACD histogram at 0.08 indicating waning bullish momentum.

Railroads Sector Under Pressure as UNP Slides 2.93%
The broader rail sector is dragging CNI lower, with Union Pacific (UNP) down 2.93% and Canadian Pacific (CP) falling 3.88%. This synchronized decline reflects macroeconomic concerns—particularly freight demand volatility and rising interest rates—pressing on transportation stocks. While CNI’s 17.96 P/E ratio is slightly cheaper than the sector average, its debt-to-equity ratio of 0.90 and beta of 0.80 suggest it’s not immune to systemic risks. Sector underperformance amplifies CNI’s near-term technical vulnerabilities.

Options and ETF Plays for a Volatile CNI
• 200-day MA: $98.13 (below current price)
• RSI: 60.13 (neutral)
• MACD: 0.97 (bullish), Signal: 0.89, Histogram: 0.08 (fading)
• Bollinger Bands: $96.78–$100.49 (current price near lower band)
• Key support/resistance: $96.78 (lower band), $98.63 (30D MA), $100.49 (upper band)
• Implied volatility is elevated at 74.67% for the $95 call (CNI20260116C95), suggesting aggressive short-term positioning. The stock’s 10.99% turnover rate and 0.11% turnover ratio indicate moderate liquidity for options.
Top Options Picks:
• CNI20260116C95 (Call):
- Strike: $95, Expiry: Jan 16, IV: 46.76%, Delta: 0.615, Theta: -0.225, Gamma: 0.051, Turnover: 400
- IV (high volatility), Delta (moderate directional bias), Theta (rapid time decay), Gamma (responsive to price swings).
- This call offers leverage (24.21% ratio) for a 5% downside scenario. If CNI breaks $96.78, the option could gain 3.61% in value.
• CNI20260220C100 (Call):
- Strike: $100, Expiry: Feb 20, IV: 18.85%, Delta: 0.159, Theta: -0.061, Gamma: 0.080, Turnover: 2,706
- IV (moderate), Delta (low directional bias), Theta (slow decay), Gamma (high sensitivity).
- This call provides exposure to a potential rebound above $98.63. With 387.40% leverage, it could outperform if CNI stabilizes near its 30D MA.
Trading View: Aggressive bulls may consider CNI20260116C95 into a bounce above $96.78, while defensive plays favor CNI20260220C100 for a longer-term rebound setup.

Backtest Canadian National Railway Stock Performance
The CNA's performance after experiencing a -4% intraday plunge from 2022 to the present has shown mixed results in the backtest. While the 3-day win rate is relatively high at 53.05%, the 10-day and 30-day win rates are slightly lower at 49.59% and 46.95%, respectively. This suggests that while the ETF has the potential to bounce back relatively quickly, longer-term performance may be more variable.

CNI at Crossroads: Sector Weakness vs. Analyst Optimism
CNI’s sharp selloff highlights the tension between bullish analyst sentiment and bearish technical momentum. While the stock’s fundamentals remain intact—evidenced by a 27.1% ROE and $1.83 EPS—its near-term outlook hinges on stabilizing above $96.78. The sector’s underperformance, led by UNP’s 2.93% drop, adds urgency to this test. Traders should monitor the $98.63 support level and the $100.49 resistance band. A break below $96.78 could trigger a retest of the 52-week low, while a rebound above $98.63 may reignite the 'strong-buy' narrative. Watch for sector leadership from UNP to signal broader market sentiment.