Truckers have attracted healthy buying interest since the presidential election, leading a D.J. Transportation Average rally that’s now testing the November 2014 bull market high. Optimism about higher U.S., growth rates is driving the uptick, with truckers expected to add miles and increase cargo volume in 2017. Even so, market players should watch fuel costs and political headlines that have the power to cut into profits and end the uptrend.

DJTA components JB Hunt Transport Services Inc. (JBHT) and Landstar Systems Inc. (LSTR) offer direct trucking exposure while several other components include trucking services in logistical supply chain operations that include a variety of transportation platforms. Both stocks hold top ten slots in index performance and could offer solid choices for longer-term portfolios.

However, one giant caveat is needed before reviewing these top performers. Truckers carried 66.5% of all NAFTA-related freight as of March 2016 while accounting for 64% of imports and 70% of exports. The President-elect has threatened to renegotiate or terminate the trade agreement, with those policy actions likely to trigger a volume plunge that sends the entire sector into a bearish tailspin.

JBHT

J.B. Hunt Transport Services broke out of a 16-year basing pattern in high single digits in 2003 and entered a powerful uptrend that peaked at 40.25 in August 2008. It got cut in half during the economic collapse, coming to rest in March 2009 at a 3-year low in the upper teens. The stock returned to the 2008 high in 2010 and broke out at the end of the year, entering a stair-step rally that continued into the April 2015 high at 93.50.

It ticked lower though the rest of the year, finally bottoming out in the low 60s in January 2016 and turning higher in a recovery wave that stalled at the .786 Fibonacci selloff retracement level in April. The stock posted higher lows in June and October, ahead of a strong bounce that reached the prior high in November. The subsequent breakout is now testing round number resistance at 100.

The breakout triggered a bearish divergence because On Balance Volume (OBV) failed to post a new high, signaling inadequate sponsorship that raises the odds for a deep pullback. The 26-point straight-up rally also triggered overbought technical readings, predicting profit taking and consolidation, most likely through lower prices. The overall price structure suggests the best buying opportunity will come on a decline into the blue line in the mid to upper 80s.

LSTR

Landstar Systems rallied out of a 3-year basing pattern in 1998 and entered a channeled uptrend that continued into 2007 when it eased into a broad topping pattern.  The stock split three times during that fruitful period while gaining more than 14% annually over 10-years. It posted a final high at 59.21 in June 2008 and lost more than half its value during the economic collapse, finally bottoming out in the upper 20s in March 2009.

It took three years for the recovery wave to complete a 100% retracement into the 2008 high and another two years for a breakout that topped out in the low 80s at the end of 2014. The stock fell throughout 2015, finally grinding out a tradable low at 53.03 in January 2016. The subsequent bounce has unfolded in two broad buying impulses that reached an all-time high at 90.75 on December 9th. It’s been pulling back for the last three weeks, working off an extremely overbought condition after adding 24-points in just seven weeks.  

This stock has carved a much stronger OBV pattern than its rival, lifting to an all-time high during the recent breakout. Even so, the rally needs actual metrics to sustain buying power, with the next data dive scheduled for February 1st when the company reports quarterly earnings. Keep one finger on the exit button if positioned ahead of the release, watching for NAFTA themed political attacks from the new White House.

The Bottom Line

Truckers have jumped to a bull market, and all-time highs after the presidential election stirred optimism about higher 2017 growth rates. However, sector profits depend on North American free trade while the president-elect could follow through on a campaign pledge to gut NAFTA, ending the rally dead in its tracks.

<Disclosure: the author held no positions in aforementioned stocks at the time of publication.>

 

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