Yesterday, we discussed the S&P 500 sectors’ performance in 2012 and shed some light on the industrial sector — which I see as a potential outperformer into year’s end — with the promise that today we’d look at one industrial stock to like (and one to dislike) heading into the last few trading weeks of the year.
Should stocks continue to drift higher into the end of the year, it would be difficult to imagine the industrial sector not participating, if not leading a “Santa Claus rally.”
Ryder System (NYSE:R) has given technical analysts much to like as of late and continues to look promising for further gains. The stock has rallied sharply off its recent low in July, yet still remains down 11% for the year, thus underperforming the industrial sector — as measured by the Industrial Select Sector SPDR (NYSE:XLI) — which is higher by almost 9% year-to-date.
The rally off the July lows has moved Ryder right into the 61.8% Fibonacci retracement level of the move from February’s highs to the July’s lows. The first try at breaking through this resistance area near $48 failed in early November, but the stock has since consolidated and is now at its second attempt to break above. Given the still-not-overbought levels in the stock’s RSI indicator and the stock’s aforementioned relative weakness to XLI, a rally in the broader market just might mean that Ryder stock could play catch-up and break above the $48 resistance zone.
Other stocks such as Equifax (NYSE:EFX) — a sort of hybrid industrial/financial — are way ahead of the industrial sector in terms of YTD performance. This stock hit a new 52-week intraday high Monday and is higher by almost 38% on the year.
After consolidating through the summer, EFX again accelerated its upward move in late September, and on Monday, it gapped up 8.4%, yet ended the day up “only” 4.2%. The intraday selloff resulted in a classic shooting star candle on the daily chart, which is recognized by its long tail in relation to its body. The oscillators also signal a few concerns, as the RSI indicator is in well-overbought territory and the stochastics have shown negative divergence to price since mid-October (higher high in price yet lower highs in stochastics).
The current setup might allow aggressive traders to short the stock with a defined stop at Monday’s highs. For everyone else, the just-described warning signals might be enough to stay away from this stock on the long side into year’s end — at least on a relative basis to industrials overall.
So there you have it: The choice is Ryder System if you’re up for a thrill, and away from Equifax if you wanna sit still.
Come on … it’s the holidays. I’m allowed to sneak in a rhyme.