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Today, we are opening a new bullish trade on J.B. Hunt Transport Services (NASDAQ:JBHT). JBHT — a U.S.-based trucking and transportation services company — is uniquely positioned to benefit from the stable growth we have been experiencing, and will likely to continue to experience, in the U.S. economy.
As gross domestic product (GDP) remains strong, the company is taking advantage of increased shipping volumes and tightening supply in the shipping industry to raise the prices it charges for its services. This means that JBHT is experiencing not only high demand for its services but also widening margins on the revenue it is generating, both of which are bolstering the company’s bottom line.
We don’t see the bullish fundamental drivers of JBHT’s success changing anytime soon. The labor market isn’t showing any signs of weakness, which means more people are going to be gainfully employed in the future with more money in their pockets to spend. The finished goods (along with the raw materials to make and power those goods) these consumers are going to be buying have to be transported by someone, and JBHT is grabbing more and more market share every quarter.
Plus, crude oil prices have finally stabilized and are actually drifting a bit lower at the moment, taking pressure off fuel prices, which is boosting JBHT’s margins even more.
After reporting quarterly earnings in mid-July, JHBT’s stock price dropped down and tested the confluence of both the long-term, up-trending support level that has been interacting with the stock since May 2017 and the short-term support level that served as the resistance level for the stock’s consolidation range in early 2018.
This support range held nicely and ended up forming the “head” of a short-term, inverted “head-and-shoulders” bullish reversal pattern. The “shoulders” formed at support at $120, and the “neckline” formed at ~$123. JBHT broke up through this level on Monday, and we expect the stock to climb back up toward the daily high of $130 the stock reached briefly on July 16.
Buy to open the JBHT September 21st $125 Call (JBHT180921C00125000) for a maximum price of $2.40.
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