12 Sell Downgrades Threaten Dow Transports

NEW YORK (TheStreet) -- The Dow transportation average has been the leading equity average so far this year. At last Thursday's latest all-time closing high at 6,281.24, Dow transports were up a staggering 18.4% year to date. While this parabolic rally occurred the transportation sector became 23.7% overvalued at Friday's close, the highest reading for this measure so far in 2013.

Back on Dec. 24 I wrote, Transports Shift Into Fast Lane and my buy-and-trade strategies profiled six buy rated stocks in the Dow Transportation Average.

Then on Jan. 16 I wrote, Transports Are Truckin' Ahead of Earnings where I updated my buy-and-trade strategies for these six buy rated stocks in the Dow transportation average and added two more.

My theme today is that truckers are getting flat tires at the end of the road, that the railroads face risks of derailment, and that the air freighters could be grounded because of 12 downgrades to sell within the Dow Transportation Average.

Among the eight buy rated stocks on Jan. 16, four have been downgraded to hold ratings and four have been downgrade to sell ratings. As a bigger sector warning, the Dow transportation average does not have a single buy rated stock, but instead has eight rated hold, a dozen rated sell and one with a strong sell rating.

With the weekly chart profile of the Dow Jones Transportation Average pinned with an extremely overbought 12x3x3 weekly slow stochastic reading at 95.24, there is no longer a reason to own any stock in this sector. My semiannual and annual pivots are 5955 and 5925 with a weekly risky level at 6350. My lower annual pivot is at 5469.

Chart Courtesy of Thomson/Reuters

Con-Way ( CNW) ($37.70 vs. $31.36 on Jan. 16) -- has been downgraded to sell from hold and traded to a year to date high at $38.25 on Thursday. My monthly value level is $26.11 with a weekly pivot at $38.22 and semiannual risky level at $39.30. This stock should be removed from investors' portfolios.

CSX ( CSX) ($24.02 vs. $20.78 on Jan. 16) -- has been downgraded to hold from buy and traded to a year to date high at $24.27 on Friday. My monthly value level is $20.76 with a quarterly pivot at $22.31 and weekly risky level at $24.82. Reduce positions on strength to the risky level.

FedEx ( FDX) ($109.07 vs. $98.67 on Jan. 16) -- has been downgraded to hold from buy and traded to a multi-year high at $109.66 on March 11. My monthly value level is $96.86 with a semiannual pivot at $103.76 and weekly risky level at $112.47. Reduce positions on strength to the risky level.

JB Hunt Transport ( JBHT) ($74.00 vs. $60.90 on Jan. 16) -- has been downgraded to sell from buy and traded to an all-time high at $74.93 on Thursday. My semiannual value level is $64.28 with a weekly risky level at $75.81. Time to book profits and move on down the road.

Norfolk Southern ( NSC) ($75.62 vs. $65.46 on Jan. 16) -- has been downgraded to sell from buy and traded to a year to date high at $75.71 on March 6. My quarterly value level is $71.18 with an annual pivot at $75.90 and weekly risky level at $78.33. Time to book profits before this investment derails.

Old Dominion Freight ( ODFL) ($37.53 vs. $35.10 on Jan. 16) -- has been downgraded to sell from buy and is below its year to date high at $37.95 set Feb. 1. My semiannual value level is $35.09 with a monthly pivot at $37.54. Time to book profits as this investment could get a fuel leak.

Union Pacific ( UNP) ($141.69 vs. $131.44 on Jan. 16) -- has been downgraded to hold from buy and traded to an all-time high at $141.78 on Friday. My monthly value level is $134.01 with a weekly pivot at $141.59 and semiannual risky level at $143.14. Reduce positions on strength to the risky level.

United Parcel Service ( UPS) ($85.47 vs. $79.33 on Jan. 16) -- has been downgraded to hold from buy and traded to an all-time high at $85.70 on Thursday. My semiannual value level is $80.21 with a weekly risky level at $86.30. Reduce positions on strength to the risky level.

Tomorrow I will evaluate the eight home builders I profile each month following the National Association of Home Builders Housing Market Index released this morning, and housing starts out Tuesday morning. Just beware that all eight have been downgraded since my last post on Feb. 21.

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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