The transportation sector is often one of the most closely watched in the financial market because it is a natural barometer of broad economic trends. Higher prices across the transportation sector are significant because they can highlight the fundamental demand for industrial goods as well as disposable income levels across the retail segment. In the paragraphs below, we'll take a close look at several charts from across the sector and try to determine how traders will position themselves over the weeks or months ahead.
SPDR S&P Transportation ETF (XTN)
Active traders interested in gaining exposure to sub-industries of the transportation sector – such as air freight and logistics, airlines and airport services, highways and rail tracks, marine, railroads, and trucking – may want to take a closer look at the SPDR S&P Transportation ETF (XTN).
As you can see from the chart below, the bulls have recently pushed the price above the combined resistance of an inverse head and shoulders pattern and its 200-day moving average. The closes and subsequent retest of the newfound support are presenting traders with an interesting entry opportunity based on risk/reward. Considering the chart setup, followers of technical analysis will likely place their target prices near $71, which is equal to the entry price plus the height of the pattern.
Hertz Global Holdings, Inc. (HTZ)
With approximately 10,200 corporate and franchise locations in North America, Europe, Latin America, Africa, Asia, Australia, the Caribbean, the Middle East and New Zealand, Hertz Global Holdings, Inc. (HTZ) is one of the most recognizable names in transportation.
Taking a look at the company's stock chart below, you can see that the price is currently trading within a defined channel pattern. The recent break above the 200-day moving average and bullish chart patterns currently found across the sector suggest that the next stop will be near the upper trendline. Should the move higher lead to a break above the upper trendline, active traders would likely set their 14-month target near $30.
Kirby Corporation (KEX)
Followers of marine companies will often be acquainted with Kirby Corporation (KEX). With a market capitalization of $5 billion, the firm offers targeted exposure to the operation of domestic barges for purposes of transporting bulk liquid products through the Mississippi River System, on the Gulf Intracoastal Waterway, along all three U.S. Coasts, and in Alaska and Hawaii.
Taking a look at the chart, you can see that the price recently moved above the resistance of the 200-day moving average, which has also acted as a catalyst to having the 50-day moving average rise higher, forming what is known as a golden cross (shown by the blue circle). This long-term buy signal is usually used to mark the beginning of a long-term uptrend and is currently offering traders an interesting risk/reward setup due to the proximity of the combined support.
The Bottom Line
The transportation sector is often used as a barometer for economic health and growth. Based on the patterns above, it appears as though growth is set to continue. Traders will want to keep a close eye on transportation stocks because of the defined risk/reward setups and how they create clear exit scenarios should the sentiment shift.
At the time of writing, Casey Murphy did not own a position in any of the securities mentioned.