Trade of the Day: Ryder System Stock Headed Downhill

Ryder System, Inc. (R) — This commercial transportation, logistics and supply chain management solutions provider reported Q3 earnings of $1.74 per share on Oct. 22. This beat the $1.72 per share expected by Wall Street analysts; however, sales of $1.67 billion missed the mark. Analysts had been expecting $1.72 billion, and R stock fell 1.5% on the day.

Higher maintenance costs and expenses related to foreign exchange have taken a toll on the company’s revenues. Furthermore, increasing competition could create downward pressure on freight rates and have a negative impact on earnings, as could the decreasing value of Ryder’s fleet of trucks.

R stock formed a right triangle earlier this year and broke down from a death cross in late July. It then plunged from about $92 to a low under $70 in a bear channel with resistance at about $73. Support is estimated at about $65 by extending the lower line of the bear channel.

MACD is negative and Thursday’s 3.2% rally was supported by only average volume.

Thursday’s jump provides an opportunity to sell R stock short above $71 with a target price of $62 by year end. This would result in gains of about 13%.

Short sellers should enter a stop-loss order at $75 and check with their broker for any unusual restrictions. Also, be aware that if you hold shares short through the stock’s ex-dividend date on Nov. 19, you will be responsible for paying the dividend of 41 cents per share to the owner of the stock.

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