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Transports Shift Into Fast Lane

Stocks in this article: CSX FDX JBHT NSC UPS

NEW YORK ( TheStreet) -- Back at the market lows of Nov. 16 the Dow Transportation Average traded as low as 4838.10, and a close that day below the June 4 closing low at 4847.73 would have been what market technicians call a Dow Theory Sell Signal. This signal was averted as trucks turned on a dime, trains switched direction and the air freighters took flight. Nov. 16 was the day of optimism that the fiscal cliff would be avoided.

On Thursday, Dow Transports traded as high as 5358 30 and a close above the Feb. 3 closing high at 5368.93 would have been a Dow Theory Buy Signal. This did not happen as a pre-Christmas compromise on a deal to end the fiscal cliff was not achieved.

The Transportation sector is not cheap as shows that this sector is 10.3% overvalued after a 10.75% rally from the Nov. 16 low to the Dec. 20 high. Railroads and truckers are less overvalued by 2.9% and 2.6% respectively. One of the two major air freight stocks is undervalued by 8.7%. Today I profile six transportation stocks that are buy rated according to ValuEngine.

On Aug. 28 Transport Stocks Hit Speed Bump when the Dow Transportation Average was trading at 5073.48, I profiled the 20 stocks in the Dow Transportation Average. In my profiles today, I include five that are in the Dow Transportation Average. Today with the transports higher at 5340.80 we find that both railroads I track are lower than on Aug. 28, the trucker is higher, and the air freighters are mixed.

Chart Courtesy of Thomson/Reuters

The daily chart above shows the Dow Transportation Average (5340.80). Note that momentum (12x3x3 daily slow stochastic) reading is extremely overbought at 96.64, well above the 80.00 overbought threshold. The 50-day and 200-day simple moving averages at 5102.55 and 5115.60 are supports. The weekly chart (not shown) is positive with the five-week modified moving average at 5137.85 with the 200-week SMA at 4547.45. This week's value level is 5211 with my quarterly risky level at 5541.

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