Sorry!! The article you are trying to read is not available now.
Thank you very much;
you're only a step away from
downloading your reports.

FedEx, UPS, Transportation Stocks Strong, but Resistance Looms


All good rallies require consolidation at some point. And looking overhead, it appears that the transports may get one sooner rather than later.

Over the past couple months, the Dow Jones Transportation Average (INDEXDJX:DJT) has been on fire. After testing its 38.2 Fibonacci retracement level multiple times last year, it pivoted and shot higher. Many transportation stocks have benefited and shown strength since. As well, the price action has helped propel the sector into a leadership role, pushing the markets higher.

That said, all good rallies require consolidation (i.e. a rest) at some point. And looking overhead, it appears that the transports may get one sooner rather than later.

Now this doesn't mean that transportation stocks are dead, or no longer investable (especially given their recent strength). Rather it points out that sector returns may be muted for a while if the index consolidates gains near resistance. And, as with any market, select stocks will outperform. After a rally of this nature, consolidation can last anywhere from a few days to a few weeks, but is usually healthy (as long as key technical levels are not breached).

Lastly, investors should also be on the lookout for a breakout higher. But note that a breakout would likely be much stronger after some consolidation. Any breakout over the next day or two would need to be monitored closely. Initial pokes into new territory after vertical runs can illicit pullbacks after a few days.

Below are charts of select transportation stocks and indices that I find of interest in the space, including FedEx (NYSE:FDX), United Postal Service (NYSE:UPS), Dow Jones US Airline Index (INDEXDJX:DJUSAR), and Delta Airlines (NYSE:DAL).

Dow Jones Transportation Average – Daily Chart

Broke out of a 2-year downtrend in December 2012. Now closing in on 2011 highs and lateral resistance. Monitor the 5600 level closely.

FedEx – Daily Chart

After bouncing off the 38.2 Fib yet again, FedEx pivoted higher (or rather rocketed higher) and now finds itself nearing key resistance. FDX is one of the key transportation stocks to monitor.

< Previous
No positions in stocks mentioned.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.

Featured Videos