Transports Shift Into Fast Lane

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 www.ValuEngine.com 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.

Reading the Table

OV/UN Valued: 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 last 12 months. Stocks with a black number increased by that percentage.

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.

Price-to-Earnings Ratios appear elevated.

Value Level: Price at which to enter a GTC limit order to buy on weakness. The letters mean; W-weekly, M-monthly, Q-quarterly, S-semiannual and A-annual.

Pivot: A level between a value level and risky level that should be a magnet during the time frame noted.

Risky Level: Price at which to enter a GTC limit order to sell on strength.

CSX ( CSX) ($19.95 vs. $22.78 on Aug. 28): Set its 2012 low at $18.88 on Nov. 16 and is lagging the transportation average needing a close above the 50-day SMA at $20.24 to target the 200-day SMA at $21.53. On the weekly chart, CSX needs a weekly close above the five-week MMA at $20.09 to have a positive weekly chart profile, while a close below the 200-week SMA at $19.15 would be a negative. The stock remains buy rated, is 15.5% undervalued and has a 12 month trailing P/E at 11.3. My weekly value level is $19.14 with a monthly risky level at $21.08.

FedEx ( FDX) ($92.74 vs. $88.00 on Aug. 28): Has performed in sync with the transportation average trading above the 50-day SMA at $90.34 and the 200-day SMA at $89.33. The weekly chart profile is positive with the five-week MMA at $89.94. The stock remains buy rated, is just 0.3% undervalued and has a 12 month trailing P/E at 14.5. My weekly value level is $89.46 with a quarterly risky level at $104.62.

JB Hunt Transport Services ( JBHT) ($59.20 vs. 53.12 on Aug. 28): Should have problems trading above its multi-year high at $61.18 set on June 19 with the 50-day and 200-day SMAs as supports at $58.51 and $55.89. The weekly chart has a negative divergence in momentum with the five-week MMA at $58.12. The stock remains buy rated, is 5.1% overvalued and has an elevated 12 month trailing P/E at 23.1. My semiannual value level is $49.82 with a monthly pivot at $58.77 and quarterly risky level at $61.42.

Norfolk Southern ( NSC) ($62.55 vs. $73.37 on Aug. 28): Has lagged the sector setting a multi-year low at $56.05 on Nov. 16. The stock is now above its 50-day SMA at $61.52 but well below its 200-day SMA at $67.76. The weekly chart profile shifted to positive last week with the five-week MMA at $61.69 and the 200-week SMA at $59.86. The stock remains buy rated, is 9.3% undervalued and has a 12 month trailing P/E at 11.7. My semiannual value level is $58.29 with monthly risky level at $68.05.

Old Dominion Freight Line ( ODFL) ($34.28): Traded to a multi-year high at $35.13 on Nov. 6. The stock is above its 50-day and 200-day SMAs at $32.73 and $30.57. The weekly chart profile shifted to positive last week with the five-week MMA at $33.02 and the 200-week SMA at $20.95. The stock has a buy rating, is 0.3% overvalued and has a slightly elevated 12 month trailing P/E at 17.2. My monthly value level is $29.61 with a weekly pivot at $35.06 and quarterly risky level at $35.68.

United Parcel Service ( UPS) ($74.84 vs. 75.26 on Aug. 28): Set its 2012 low at $69.56 on Nov. 15 and the Dec. 19 high was a failed test of the 200-day SMA at $75.67. The 50-day SMA is a support at $72.86. The weekly chart profile has been positive with the five-week MMA at $73.10 and the 200-week SMA at $66.46. The stock has a buy rating down from strong buy on Aug. 28. The stock is 8.7% undervalued and has a slightly elevated 12 month trailing P/E At 16.4. My weekly value level is $72.75 with an annual risky level at $78.96.

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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