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Record High Transports a Second Chance to Sell

Stocks in this article: CNW CSX FDX JBHT NSC ODFL UNP UPS

NEW YORK ( TheStreet) -- The Dow transportation average and the Dow industrial average both set new all time closing highs on Tuesday -- 6397.34 transports and 15,056.20 industrials. This provides another Dow Theory Buy Signal, but in my opinion the transportation sector remains rated "avoid-source of funds" and stocks in this sector should be sold.

Transports are up 20.5% year to date vs. 14.9% for the industrials, but the transportation sector is 17.6% overvalued. There are 184 stocks in the transportation sector with only four buy rated stocks and 16 rated hold. With 101 sell rated stocks and 52 strong sell rated stocks, 83.2% of all stocks in this sector are rated sell, thus the "avoid-source of funds" rating for the sector.

In addition to this warning on transports, shows that 65.9% of all stocks are overvalued due to this week's market strength plus the rise in the 30-Year Treasury bond yield to 3.00% from 2.82% a week ago.

It seems like each time we have these signals the market sets a near term top. On March 18 I wrote, 12 Sell Downgrades Threaten Dow Transports and a day later the Dow transportation average set a tradable high at 6291.65 then traded down 6.6% to a low of 5878.12 on April 5.

In today's post I show four additional downgrades to sell; two more railroads and the two air freight companies. Now all eight transportation stocks I have been tracking are rated sell. This gives investors a second chance to book profits in the stocks I profiled today.

Con-Way (CNW) ($34.33 vs. $37.70 on March 18): Missed EPS estimates by eight cents on May 1 earning 19 cents a share. The stock held its 200-day simple moving average at $31.05 on May 2 and the 50-day SMA at $34.65 was tested on strength on May 7. The weekly chart profile shifts to neutral from negative on a close this week above the five-week modified moving average at $34.01. My monthly value level is $32.30 with a semiannual risky level at $39.30 for this sell rated trucker.

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