The breakout today continues a strong rally for UPS. The stock began this month with a slightly negative day after spending the latter half of July and all of August in a tight range. UPS pushed through heavy resistance near its 50- and 200-day moving average in mid-July with the help of a big surge in trade. The stock remained well above support following the mid-July pop but struggled to mount much of a move. This sideways action carried into September as volume, especially on the downside, slowed dramatically.

UPS Weekly -- NYSE United Parcel Service Source: TradeStation

This trend began to change on Sept. 2 and 3 when UPS began a seven-day winning streak after a successful retest of its 50-day moving average. The rally received a major jolt from a JPMorgan upgrade on Wednesday. UPS responded with a gap-higher open that lifted it above the August highs. Volume on the surge was very heavy, confirming an important breakout for the stock.

UPS Daily -- NYSE United Parcel Service Source: TradeStation

Yesterday was more of the same, with another push higher on well-above-average trade. Today's ramp will attract the heaviest volume in four months, pushing the September gains to 10%. In the short term, UPS is a bit overextended and will likely need a healthy pullback soon. I expect the stock to work higher through year-end and will take advantage of low-volume weakness to add to UPS longs. A pullback to the $56.50-to-$57 area would be a low-risk buying opportunity. On the upside, I expect UPS to test the $65 level by year-end.

Long UPS