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Transports Shift Gears to a Market Leadership Role

NEW YORK (TheStreet) -- The Dow Jones Transportation Average has been the weakest so far this year among the five major averages I follow.

Transports began the week up only 1.4% year to date compared to the Dow Jones Industrial Average, which was up 4.5%; the S&P 500, which was up 6.8%; the Nasdaq, which was up 10.3%; and the Russell 2000, which was up 4.1%.

The major equity averages closed Monday straddling their 50-day simple moving averages, but only the Dow transports closed above its 50-day, at 5128.

With a gain of 100 points on the day, the transports jumped to a 3.4% year-to-date gain. The Dow Jones Transportation Average is up 31.4% since its Oct. 4, 2011 low and is only 7.7% below its July 11, 2011 all-time high at 5627.85.

The daily chart for Dow Transports shows rising momentum (12x3x3 daily slow stochastic) reading at 69.25 on a scale of 00.00 to 100.00, where a reading below 20.00 is oversold and above 100.00 is overbought.

As the chart below shows, transports moved above its 50-day at 5128 on Monday, and is also above its 21-day and 200-day simple moving averages at 5022 and 4983, respectively.

Daily and weekly value levels are 5126 and 4931 with a quarterly risky level at 5420, and the all-time high at 5627.85. I do not expect Transports to return to that all-time high this year.

Chart Courtesy of Thomson/Reuters

Fundamentally, the transportation sector is 6.1% undervalued according to ValuEngine, and in screening the components of the Dow Transportation Average, I found 10 stocks with buy ratings. Of these, I will profile seven that should be considered "buy and trade" candidates. It seems that lower fuel costs are helping transportation stocks lead a recovery.

CH Robinson Worldwide (CHRW) is barely a buy-rated stock as the forecast one-year return is just 5.1%, as the stock would be rated a hold (3-Engine Stock in the table above) with this projection below 5.0%. The stock set a 52-week low at $55.88 on June 5. The upside for a short-term "buy and trade" strategy is to my monthly risky level at $61.41 vs. the one-year price target at $62.02.

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