The essential role that transportation companies play in today's modern economy has become very apparent in 2020. As many traders look back on the year and plan how to reallocate their capital in 2021 and beyond, the transportation sector – including carriers, railroads, long-haul trucking, and related infrastructure services – will likely have stronger representation in portfolios for years to come. In this article, we look at a few charts from across the sector and try to determine how traders will attempt to profit from a move higher.
- Charts reiterate the importance of the transportation sector in today's economy.
- Key holdings of transportation exchange-traded funds (ETFs) will likely be the focus of traders over the weeks ahead.
SPDR S&P Transportation ETF (XTN)
Active traders who are interested in gaining exposure to niche market segments such as transportation often turn to exchange-traded products such as the SPDR S&P Transportation ETF (XTN). Looking at the chart below, you can see that the price has been trading within a defined uptrend since recovering from the March selloff.
The recent break beyond upper trendline, shown by the blue circle, is being used by many traders to mark the beginning of the next leg higher. Based on the pattern below, followers of technical analysis will most likely look to place buy orders as close to $66.13 as possible and then place stop-loss orders below $60 or $55.70, depending on risk tolerance and outlook.
J.B. Hunt Transport Services, Inc. (JBHT)
As one of the top holdings of the XTN ETF, J.B. Hunt Transport Services, Inc. (JBHT) will likely capture the attention of many active traders over the weeks ahead. Looking at the chart below, you'll notice that the price of the stock has been trading within a defined range since reaching the peak back in August.
The retracement and subsequent bounce off the 200-day moving average is of specific interest to active traders because it shows that the bulls are in control of the momentum. The recent break beyond the upper trendline will likely be looked to by active traders to mark the beginning of a major move higher. From a risk-management perspective, stop-loss orders will most likely be placed below $132 or $120.70, depending on risk tolerance and outlook.
Macquarie Infrastructure Corporation (MIC)
As the top holding of the XTN ETF, Macquarie Infrastructure Corporation (MIC) could be of specific interest to active traders. As the provider of jet fuel, terminal, and hangaring services to general aviation, the company plays a key role within the transportation sector.
Looking at the chart below, you can see that the bulls recently sent the price above the resistance of the 200-day moving average. The surge in momentum has also triggered a bullish crossover between the 50-day and 200-day moving average, known as the golden cross, which is often used by followers of technical analysis to mark the beginning of a major uptrend. Based on this pattern, traders will likely maintain a bullish outlook on the company until the share price closes below $28.38 or the lower trendline.
The performance of companies in the transportation industry is highly sensitive to fluctuations in company earnings and the price of transportation services. The main factors affecting company earnings include fuel costs, labor costs, demand for services, geopolitical events, and government regulation. Many of these factors are interconnected.
The Bottom Line
2020 has brought the role of certain sectors such as transportation to the forefront. As active traders look to reallocate their capital in 2021, the charts discussed above will likely continue to be a factor that leads many to shift capital into the diverse range of companies involved in transportation.
At the time of writing, Casey Murphy did not own a position in any of the assets mentioned.