Transports Outperform, But Some Moves Lack Conviction

By | April 15, 2016

Scalper1 News

Transports have perked up in recent weeks, but the sector is a big one, filled with leading and lagging sub-groups. Equipment manufacturers in the sector soared Wednesday but there’s not much leadership in the group. Same with shipping and railroad stocks which also turned in a solid performance the same day. Year-to-date, the Dow Transports are up 6% compared to a gain of around 1.6% for the S&P 500. Is the sector pricing in better times ahead for the U.S. economy? Maybe, maybe not, but several stocks in the sector bear watching due to favorable technical setups. UPS ( UPS ) is setting up in a cup-with-handle base with a 106.71 buy point ahead of its April 28 earnings report. A solid report could be in store if results from competitor FedEx ( FDX ) are an indication. FedEx is showing equally strong technical action, trading tightly after soaring 13% in huge volume during the week ended March 18. A strong earnings report was the catalyst. FedEx Ground was one of the main bright spots in the quarter, with revenue up 30% to $4.41 billion. FedEx is a bit of an anomaly, however, because its big weekly gain in mid-March was a clear sign of institutional buying, something that’s been missing in several other transport names. IBD’s airline group has held on to a lofty rank in IBD’s 197 Industry Group Rankings, helped by strong price performance over the past six months. Several names in the group continue to show relative strength, but two names holding above recent buy points haven’t seen much conviction behind the buying. Alaska Air ( ALK ) is near the high end of buy range from a prior 78.59 cup-with-handle buy point, but the breakout came in tepid volume. Alaska Air recently added a new handle with an 83.19 entry so new buyers might want to wait for the possibility of a fresh breakout in heavy volume. Southwest ( LUV ) is still in buy range from a 45.49 cup-with-handle entry, but it was a tepid breakout as well. Earnings are due April 21 before the open. Among logistics firms, C.H. Robinson Worldwide ( CHRW ) and Expeditors International ( EXPD ) are holding above recent buy points but their breakouts also came in soft trade. The problem with low-volume breakouts is that they generally make for a weak foundation. Some can work, but plenty of others will run out of steam quickly. Institutional buying makes for a stronger foundation, not only for individual stocks but for the major averages as well. Among trucking firms. J.B. Hunt ( JBHT ) is flirting with a breakout from a long cup-with-handle base with an 87.04 buy point. It looks a little better than the aforementioned names because of a recent Accumulation/Distribution of A- and up/down volume ratio of 1.5. Both data points indicate institutional buying in recent weeks. Scalper1 News

Scalper1 News