Dow Transports Turns Positive

NEW YORK ( TheStreet) -- Dow Transports continue to the lag the other four major equity averages I track, but last Friday's close was finally technically positive. The Dow Transportation Average is up only 3.5% year to date lagging the Dow Industrial Average, which is up 8.7% with the S&P 500 up 12.8%.

Back on July 25th I wrote On the Lookout for a Dow Theory Sell Signal, which required that Dow Industrials follow Transports lower with a daily close at a new year to date low. Instead, the Industrials rebounded leaving Transports on the off ramp until Friday's positive weekly close. The potential Dow Theory Sell Signal I was tracking has become a Dow Theory non-confirmation.

On Aug. 13, I wrote Trading Industrial and Transportation Stocks where I focused on "buy and trade" strategies for Industrials in the Industrial Select Sector SPDR Fund ( XLI). The XLI included several transportation stocks, so today with Dow Transports having a positive weekly chart I am profiling all 20 stocks in the Dow Transportation Average.

Dow Transports are up 31.5% from its October 2011 low at 3950.66 and is down 7.7% from its all time high of 5627.85 set on July 7, 2011. The decline from the all time high to the October 2011 low totaled 29.8%.

Chart Courtesy of Thomson/Reuters

The weekly chart for the Dow Transportation Average shows rising momentum (12x3x3 weekly slow stochastic) and a weekly close above its five-week modified moving average at 5125. My semiannual value levels are 4449 and 4129 with a weekly pivot at 5214 and monthly risky level at 5373.

The above table shows data from www.ValuEngine.com covering the 20 stocks in the Dow Transportation Average.

Reading the Table

OV/UN Valued -- The stocks with a red number are undervalued by this percentage. Those with a black number are overvalued by that percentage according to ValuEngine.

VE Rating -- A 1-Engine rating is a Strong Sell, a 2-Engine rating is a Sell, a 3-Engine rating is a Hold, a 4-Engine rating is a Buy and a 5-Engine rating is a Strong Buy.

Last 12-Month Return (%) -- Stocks with a red number declined by that percentage over the past 12 months. Stocks with a black number rallied by that percentage over the past 12 months.

Forecast 1-Year Return -- Stocks with a red number are projected to decline by that percentage over the next 12 months. Stocks with a black number in the table are projected to move higher by that percentage over the next 12 months.

Analysis of the Transportation Stocks

Looking at the overvalued/undervalued data six of the transportation stocks are overvalued with Kansas City Southern ( KSU) overvalued by 11%. The most undervalued are Overseas Shipholding ( OSG), 59.1% undervalued, with United Continental ( UAL) 33.8% undervalued.

There is one "1-Engine" Strong Sell rated stock, OSG, six "3-Engine" Hold rated stocks, eleven "4-Engine" Buy rated stocks, and two "5-Engine" Strong Buy rated stocks.

The best performers over the past 12 months were KSU with a gain of 45.0%, JB Hunt ( JBHT) with a gain of 42.0%, and Union Pacific ( UNP) by 39.1%. The biggest loser was OSG with a loss of 57.8%.

We do not have a projection on the performance of OSG for the next 12 months, but all others are expected to be higher led by UNP by 13.3% and United Parcel Service ( UPS) by 12.7%.

Ten of the 20 stocks have elevated P/E ratios of 15.7 times to 23.6 times.

Value Levels, Pivots and Risky Levels for Seven Transport Stocks

CH Robinson Worldwide ( CHRW) ($57.04) -- My monthly value level is $54.27 with a weekly pivot at $56.31 and a semiannual risky level at $71.16.

CSX ( CSX) ($23.39) My semiannual value level is $22.60 with a weekly pivot at $24.04 and a quarterly risky level at $27.63.

FedEx ( FDX)) ($90.00) My semiannual value level is $82.97 with a weekly pivot at $90.31 and a monthly risky level at $96.15.

JB Hunt Transports ( JBHT) ($55.41) My semiannual value level is $49.82 with a weekly pivot at $55.58 and a monthly risky level at $61.79.

Kansas City Southern ( KSU) ($77.77) My monthly value level is $73.32 with a weekly pivot at $78.70 and a quarterly risky level at $80.95.

Norfolk Southern ( NSC) ($75.10) My semiannual value level is $68.50 with an annual pivot at $77.92 and a quarterly risky level at $82.46.

United Parcel Service ( UPS) ($86.10) My quarterly value level is $76.94 with a weekly pivot at $88.09 and a monthly risky level at $91.48.

At the time of publication, the author held no positions in any of the stocks mentioned.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

Richard Suttmeier has an engineering degree from Georgia Tech and a master of science from Brooklyn Poly. He began his career in the financial services industry in 1972 trading U.S. Treasury securities in the primary dealer community. In 1981 he formed the Government Bond Department at LF Rothschild and helped establish that firm as a primary dealer in 1986. Richard began writing market research in 1984 and held positions as market strategist at firms such as Smith Barney, William R Hough, Joseph Stevens, and Rightside Advisors. He joined www.ValuEngine.com in 2008 producing newsletters covering the U.S. capital markets, and a universe of more than 7,000 stocks. Richard employs a "buy and trade" investment strategy and can be reached at RSuttmeier@Gmail.com.

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