Continue to Avoid Transportation Stocks

NEW YORK (TheStreet) -- The Dow transportation average set its latest all time high at 6,568.41 on May 20, two days below the Dow industrial average set its latest all time high at 15,542.40. In Record High Transports a Second Chance to Sell on May 8, all eight of the transportation stocks I have been tracking had sell ratings. Today six are rated sell and two rated hold. On May 8, 83.2% of all stocks in this sector were rated sell, and today 74.9% are rated sell, still negative enough to rate the sector "avoid-source of funds".

Investors had that second chance to sell as Dow transports set another all-time high on May 20.

In today's table of stocks, all eight are overvalued and seven of eight had double-digit gains of 10.1% to 47.2% over the last 12 months. The projected losses for the next 12 months range from down 4.4% and 8.6%. Caution flags are up as the 12 month trailing price-to-earnings ratios are becoming elevated between 14.1 and 27.1. All are above their 200-day simple moving averages which risks reversion to the mean.

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.

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.

Con-Way ( CNW) ($39.81 vs. $34.33 on May 8) set a new 52-week high at $40.14 on June 14. The weekly chart profile stays positive with a close this week above its five-week modified moving average at $37.24. My monthly value level is $38.54 with a semiannual pivot at $39.30 and weekly risky level at $41.24.

CSX ( CSX) ($25.29 vs. $25.33 on May 8) set its 52-week high at $26.36 on May 21, the day after the peak in the Dow transportation average. The weekly chart shifts to negative on a close this week below the five-week MMA at $24.90. My quarterly value level is $18.48 with a monthly pivot at $24.71 and weekly risky level at $26.55.

FedEx ( FDX) ($99.48 vs. $99.52 on May 18) set its multi-year high at $109.66 on March 11 well before the transportation average peaked. The weekly chart stays positive on a close this week above the five-week MMA at $98.32. My quarterly value level is $84.75 with a semiannual risky level at $103.76.

JB Hunt Transport ( JBHT) ($72.70 vs. $73.04 on May 8) set its multi-year high at $77.20 on May 22, two days after the transportation average peaked. The weekly chart stays negative given a close this week below the five-week MMA at $72.67. My quarterly value level is $66.35 with a weekly risky level at $75.48.

Norfolk Southern ( NSC) ($77.03 vs. $78.41 on May 8) set its multi-year high at $81.00 on May 21, one day after the transportation average peaked. The weekly chart stays negative given a close this week below the five-week MMA at $76.83. My semiannual value level is $74.99 with an annual pivot at $75.90 and monthly risky level at $77.07.

Old Dominion Freight ( ODFL) ($43.15 vs. $40.15 on May 8) set its multi-year high at $44.00 On May 28, after the transports peaked. This high was re-tested on June 10. The weekly chart remains positive but overbought with the five-week MMA at $41.24. My quarterly value level is $37.20 with a monthly risky level at $44.83.

Union Pacific ( UNP) ($157.95 vs. $153.72 on May 8) set its multi-year high at $161.00 on May 22, two days after the transports peaked. Shortly after my May 8 post this stock was upgraded to hold from sell. The weekly chart remains positive but overbought with the five-week MMA at $153.28. My semiannual value level is $143.14 with a monthly pivot at $156.79 and weekly risky level at $164.10.

United Parcel Service ( UPS) ($87.43 vs. $88.66 on May 8) set its multi-year high at 89.96 on May 8 versus the transports peak on May 20. The weekly chart stays negative given a close this week below the five-week MMA at $86.05. My semiannual value level is $80.21 with a monthly risky level at $89.67.

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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