Shares of transportation stocks for the year-to-date are higher by about 8% and staged a breakout move just a couple of days ago. Trucking company Ryder (NYSE:R) has been lagging this move higher in the transportation group but looks increasingly likely to play catch-up soon. Active investors and traders would be wise to respect the recent bullish reversal in R stock.
At the core of my analysis process is respecting the high correlation not only among stocks as an asset class but more so within each sector and group of stocks. As such, when I see a strong bullish move in a broader group of stocks, picking out a laggard (all else being equal) can often be a high probability bet.
To wit, for 2018 thus far we have seen at least ten major sector moves from bearish to bullish and vice versa where high-probability trading and investing opportunities were as simple as following the money — i.e., buying/selling just about any stock in any of those sectors/groups had a very high probability of profit.
R Stock Charts
Moving averages legend: red – 200 week, blue – 100 week, yellow – 50 week
Looking at the multiyear weekly chart of R stock, we see that it has been subject to wild swings over the past few years and is trading within a narrowing wedge (black lines). More importantly, however, is that this stock is nowhere near its all-time highs, while the transportation stocks as a group at the bottom of the chart in blue just recently broke to fresh all-time highs.
While this does not mean that R stock absolutely must also see a major rally from here, in my eye the stock at the very least is supported from a big drop lower — all else being equal, of course.
Moving averages legend: red – 200 day, blue – 100 day, yellow – 50 day
Moving on to the daily chart, we see that R stock began a nice rally in June, and one that steadily pushed it back above its intermediate-term moving averages. By the second half of July, the stock pushed above its red 200-day simple moving average, where it has held ever since. In fact the mid $70’s have acted as very clear support and now the $76-$76.50 area not only has horizontal support but also is where both the 50- and 200-day simple moving averages collide for very defined support.
The trade here is to buy R stock around $78 with a next upside profit target at $85. Any strong bearish reversal, and at the latest a push and hold below $76, is a stop-loss signal.
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