J.B. Hunt Transport Missed on Earnings - How to Trade It

Buy J.B. Hunt Transports on weakness to the quarterly value level at $104.48 and reduce holdings on strength to the monthly, semiannual and annual risky levels at $119.82, $131.96 and $140.10, respectively.
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J.B. Transport Services  (JBHT) - Get Report reported earnings Friday and missed on both earnings-per-share and on revenue. 

Shares of J.B. Hunt closed Thursday just below its monthly pivot at $119.82 providing a warning. 

The stock gapped lower at Friday’s open, trading down to $113.01 below its weekly value level at $117.14 and its 50-day simple moving average at $116.28.

The weekly chart for the trucker will end the week negative with the stock below its five-week modified moving average at $116.10.

The stock is a component of the iShares Transportation Average ETF IYT and is the fifth largest component with a 6.45% weighting. 

IYT has been in recovery mode so far this year and set its 52-week high of $203.89 earlier on Friday.

The ETF is just 3% below its all-time intraday high of $209.43 set on Sept. 14, 2018.

The Weekly Chart for IYT

Weekly Chart For IYT

Weekly Chart For IYT

Courtesy of Refinitiv XENITH

The weekly chart for IYT is positive with the EFT above its five-week modified moving average at $196.64. 

The ETF is well above its 200-week simple moving average or “reversion to the mean” at $175.87, last tested at $163.89 during the week of Jan. 4, 2019. 

The 12x3x3 weekly slow stochastic reading will rise to 75.15 this week up from 73.43 on Jan. 10.

Its quarterly value level is $185.15 with its semiannual and annual risky levels at $218.88 and $229.56, so a new high appears highly likely.

J.B. Hunt closed Thursday at $119.76, up 2.6% so far in 2020 and in bull market territory 43.2% above its May 30 low of $83.64. This is a consolidation of a longer-term bear market decline of 36% from its all-time intraday high of $131.74 set during the week of June 15, 2018 to its May 30 low of $83.64.

The Daily Chart for J.B. Hunt

Daily Chart For J B Hunt

Daily Chart For J B Hunt

Courtesy of Refinitiv XENITH

The daily chart for J.B. Hunt shows the bull market run since May 30. Positive reactions to earnings on July 15 and Oct. 15 powered the stock to its Nov. 17 high of $122.29. 

This strength was helped by a formation of a “golden cross” on Sept. 9 when the 50-day simple moving average rose above the 200-day simple moving average and confirmed that higher prices would follow.

At the turn of the year and decade the stock closed at $116.78. 

Semiannual and annual risky levels are above the chart at $131.96 and $140.10, respectively. 

Going into Friday's earnings the stock was below its monthly pivot at $119.82. The stock gapped below its weekly value level at $117.14 and now there is risk to its quarterly value level at $104.48.

The Weekly Chart for J.B. Hunt

Weekly Chart For J B Hunt

Weekly Chart For J B Hunt

Courtesy of Refinitiv XENITH

The weekly chart for J.B. Hunt will be downgraded to negative if the stock ends Friday below its five-week modified moving average at $116.10. 

The stock is above its 200-week simple moving average or “reversion to the mean” at $102.07 last crossed to the upside during the week of August 23 when the average was $97.88. 

The 12x3x3 weekly slow stochastic reading is projected to slip to 62.30 this week down from 64.74 on Jan. 10.

Trading Strategy: Buy weakness down to the quarterly value level at $104.48 and reduce holdings on strength to the monthly, semiannual and annual risky levels at $119.82, $131.96 and $140.10, respectively. 

How to use my value levels and risky levels:

The closes on Dec. 31, 2019 were inputs to my proprietary analytics and resulted in new monthly, quarterly, semiannual and annual levels. Each uses the last nine closes in these time horizons.

New weekly levels are calculated after the end of each week. New monthly levels occur after the close of each month. New quarterly levels occur at the end of each quarter. Semiannual levels are updated at mid-year. Annual levels are in play all year long.

My theory is that nine years of volatility between closes are enough to assume that all possible bullish or bearish events for the stock are factored in.

To capture share price volatility investors should buy on weakness to a value level and reduce holdings on strength to a risky level. A pivot is a value level or risky level that was violated within its time horizon. Pivots act as magnets that have a high probability of being tested again before its time horizon expires.

How to use 12x3x3 Weekly Slow Stochastic Readings:

My choice of using 12x3x3 weekly slow stochastic readings was based upon back-testing many methods of reading share-price momentum with the objective of finding the combination that resulted in the fewest false signals. I did this following the stock market crash of 1987, so I have been happy with the results for more than 30 years.

The stochastic reading covers the last 12 weeks of highs, lows and closes for the stock. There is a raw calculation of the differences between the highest high and lowest low versus the closes. These levels are modified to a fast reading and a slow reading and I found that the slow reading worked the best.

The stochastic reading scales between 00.00 and 100.00 with readings above 80.00 considered overbought and readings below 20.00 considered oversold.

A reading above 90.00 is considered an “inflating parabolic bubble” formation that is typically followed by a decline of 10% to 20% over the next three to five months.

A reading below 10.00 is considered as being “too cheap to ignore” which typically is followed by gains of 10% to 20% over the next three to five months.

Disclosure: The author has no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours.