Is it time to keep on trucking? If you’re in the Nasdaq Composite, that is certainly the case. But not all transportation stocks are performing equally. Some are plowing ahead, and others have hit serious roadblocks. Today, I want to take a look at three primed for trading opportunities.
The Nasdaq Composite is ending this week on a high note. Investors can thank earnings beats from influential index constituents like Apple (NASDAQ:AAPL), Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) and Facebook (NASDAQ:FB). Could more all-time highs be just down the road?
But while many trillion-dollar stocks muscle the major indices into a deeper state of divergence from the overall economy, other market sectors have been less of a one-way street for investors.
Transportation stocks are one area embodying this other reality. The iShares Transportation ETF (NYSEARCA:IYT) is down almost 12% in 2020. But not all companies in this broad industry exchange-traded fund share the same fate. Shares of United Parcel Service (NYSE:UPS) just hit all-time highs on the heels of Thursday’s solid quarterly results.
In general, transport companies of all kinds have been more grounded in their day-to-day ability to move forward. Having said that, let’s explore a couple situations where the tire is meeting the road. Here are three transportation stocks ready to trade. They may just be worth a long-haul investment:
Transportation Stocks: Landstar Systems (LSTR)
The first of my transportation stocks to trade is Landstar Systems. While the name might not be entirely familiar, this diversified mid-capitalization company does weigh in at 7.6% of the IYT ETF. The company is obviously a big deal. Moreover, shares are ready for a big-time breakout.
Technically, Landstar’s monthly price chart shows a stock which staged a breakout this month shortly after a recent earnings beat. Currently, this transportation stock has pulled back just beneath the breakout level of $125.03 from its near two-year long W-shaped corrective base. With stochastics continuing to point higher, I’m anticipating today’s weakness will prove short-lived.
My recommendation is to buy shares of this transportation stock using a “second attempt” strategy if Landstar can motor back through its slightly improved, new all-time high of $126.13.
The next of my transportation stocks to trade is Amazon. One of the market’s heavyweights, Amazon destroyed earnings forecasts last night, powered by results from its retail business. Amazon might not be in the IYT. But given the company’s e-commerce presence and massive in-house logistics operation, it would be hard to argue that Amazon isn’t a transportation stock.
If investors have been thinking that the market has gotten ahead of itself, AMZN stock suggests there’s more gas in the tank. Shares are up by roughly 4.3% on Friday but still idling within a three-week basing pattern. This pattern has allowed a prior overbought condition to shift into neutral.
Strategically, I’d recommend buying shares above the formation and all-time high of $3,344. That’s still a ways away. But buying high and selling higher makes sense in Amazon right now. This type of entry should allow momentum to reassert itself from a strong position with stochastics expected to bullishly crossover inside neutral territory and support a move to new highs.
Transportation Stocks: Nikola (NKLA)
The last of today’s transportation stocks to trade is Nikola. Anyone with slightly more than a passing interest in the stock market is aware of Nikola. It has fast become one of Wall Street’s most contentious battleground stocks. It has no profits, and it is a concept-stage manufacturer of electric pick-up trucks and big rigs for commercial operations. Investors are truly divided on the name.
The story might sound familiar. Where have we heard it before? Well, if you guessed Tesla (NASDAQ:TSLA), you’d be correct. Incidentally, the EV giant is a rival for Nikola as the company also has plans to enter the long-haul trucking business.
In the not-so-distant past, I’ve warned against Nikola and its frothy, technically risky share price. The options trade paid off huge, too. But the stock has shed roughly 70% in a handful of weeks and now sports a more modest valuation of $10.7 billion.
With earnings set for next Tuesday, I’m shifting gears. If Nikola can pleasantly update Wall Street with more clarity on its business plans, there’s a chance this well-traded stock might be worthy of finding its way into investors’ portfolios for a trade or even for the long haul.
Chris Tyler is a former floor-based, derivatives market maker on the American and Pacific exchanges. Investment accounts under management do not currently own positions in any of the securities mentioned in this article. The information offered is based on his professional experience but strictly intended for educational purposes only. Any use of this information is 100% the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.