Transports Shaping Up

By Joey Fundora | July 27, 2010 AAA

FedEx Corporation (NYSE:FDX) gapped sharply higher on Monday after the company raised its profit outlook. This stock had been grinding lower along with many of its peers since April, but even before the news, FDX had been starting to stabilize. FDX had been following a channel lower as it corrected the prior rally until it managed to clear the upper bounds in July. While the initial move proved too difficult to hold, the Monday gap could change the entire character of this chart. This gap took FDX back near its 200-day moving average, and more importantly, FDX was able to clear an important high near $79. While FDX will likely come back to fill this gap, it may find buyers at this level who missed the boat on the last move.

Source: StockCharts.com

Of course, one can't mention FDX without immediately thinking of its primary competitor, United Parcel Service (NYSE:UPS). UPS is following a similar pattern to FDX in that it is clearing a downtrend channel and just cleared an important resistance level near $63.50. One big difference however, is that UPS remains above its 200-day moving average. While both UPS and FDX are probably too extended to enter into new positions, the recent gap was very bullish and both could be decent trading candidates after a pullback.

Source: StockCharts.com

One lesser-known transport that is sporting a much nicer looking chart is Atlas Air Worldwide Holdings (Nasdaq:AAWW). This stock had been working on a base while the others in the group were correcting. It cleared the descending trendline that had been marking its recent rally attempts and is in the process of testing its 52-week highs. It is also very near its all-time highs.

Source: StockCharts.com

Pacer International (Nasdaq:PACR) is another smaller and lesser-known transports stock that has an interesting looking chart. While there may be some subjectivity to how you would identify an upper trendline, it is quite clear that PACR has had a difficult time holding above $8 per share. It also has been following a rising trendline below and recently bounced off this level. While this is another stock that is too extended for most traders' taste, it should be watched to see if it can hold above $8 and possibly present a better entry.

Source: StockCharts.com

Bottom Line
While many other groups often take the limelight, the health of the transports is vital to any possible bottoming process in the markets. The transports deliver the goods we consume, and they are often one of the first groups to show signs of a recovery. With the recent focus in the markets centering on the possible deterioration of the consumer economy, watching this group becomes even more important. Overall, the transports are starting to shape up and could be ending the correction that began in late April. If this ends up being the case, it may mean that other sectors will soon follow.

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

At the time of writing, Joey Fundora did not own shares in any of the companies mentioned in this article.

comments powered by Disqus
Related Analysis
  1. In the Thick of Earnings Season - Ahead of Wall Street
    Stock Analysis

    In the Thick of Earnings Season - Ahead of Wall Street

  2. The ADX Shows Strong Uptrends In These 4 Stocks
    Chart Advisor

    The ADX Shows Strong Uptrends In These 4 Stocks

  3. Falling Prices Are Dragging These Gold Stocks Down
    Chart Advisor

    Falling Prices Are Dragging These Gold Stocks Down

  4. Invest In Dividend Aristocrats With This ETF
    Chart Advisor

    Invest In Dividend Aristocrats With This ETF

  5. Downward Trend Channels for the Market Correction
    Chart Advisor

    Downward Trend Channels for the Market Correction

Trading Center