Indecision and doubt have held transportation stocks in place since a post-election rally fizzled out in mid-December. Truckers are partially to blame, with the sub-sector now underperforming airlines, parcel companies, and railroads by a wide margin. Anxiety about NAFTA and the future of North American trade are weighing on sentiment, with uncertainty and mixed messages forcing market players back to the sidelines.
Harsh words about Mexican trade by the Trump administration have generated a nationalist response from our friends south of the border, who now insist they’ll walk away from unilateral pressure. That’s a big problem for U.S. truckers who depend on cross-border traffic for a fair share of quarterly revenues. Given the high stakes, it makes sense to assume the group will enter a bear market if protectionist threats turn into legalization and policy in coming months.
Swift Transportation Co. (SWFT) topped out at $29.44 in December 2014 following a 2-year uptrend and entered a steep correction in April 2015. Selling pressure continued into the first quarter of 2016, dropping the stock to a 3-year low at $11.74. The subsequent recovery wave stalled at the .786 Fibonacci selloff retracement just two points below the prior high in December, yielding a pullback that’s now testing the 200-day EMA.
Accumulation has taken a hit since December, dropping On Balance Volume (OBV) to the lowest-low since September while newly-minted shareholders hit the sidelines. The decline has now filled the October gap between $20.25 and $20.75, offering a perfect spot for an oversold bounce. However, the stock is now fully engaged in a monthly Stochastics sell cycle, lowering odds for a high percentage recovery rally.
J.B. Hunt Transport Services Inc. (JBHT) holds the highest capitalization in the trucking sub-sector, at $10.8-billion, after spending many years as an industry and market leader. A long-term uptrend topped out at 93.50 in April 2015, giving way to a steep slide that found support in January 2016 at a 3-year low. It rallied within four points of the prior high in April and pulled back through the summer months, ahead of a secondary buying wave that reached resistance in late November.
OBV failed to reach a new high (black line) when a breakout stalled at $102.38 in December, giving way to a narrow sideways pattern that’s still in force more than three months later. A February bounce toward range resistance came up short, with aggressive sellers taking control less than two points under the prior high. The stock has now drifted into the lower half of the trading range while OBV has fallen to mid-2016 levels (red line).
Landstar System Inc. (LSTR) broke out above the 2008 high at $59.21 in 2014 and entered an uptrend that topped out at $81.80 in November 2014. It sold off through 2015, hitting bottom in the low-50s in the first quarter of 2016. The subsequent bounce unfolded in two rally waves, with the second impulse triggering a November breakout that stalled above $90 in early December.
It then rolled into a narrow trading range that nearly broke down in February when the stock sold off through the 50-day EMA. Committed buyers came to the rescue, but the subsequent bounce failed to reach range resistance at the end of February, triggering a decline that’s testing moving average support once again. Meanwhile, OBV continues to lose ground, signaling that frustrated shareholders are abandoning positions.
The Bottom Line
Blue-chip truckers have run in place since fourth-quarter breakouts stalled in December. Concerns about NAFTA and cross-border traffic have driven the standoff; while accumulation-distribution indicators point to frustrated shareholders dumping positions and hitting to the sidelines.
<Disclosure: the author held no positions in aforementioned stocks at the time of publication.>