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Industrials Igniting: ODFL MTZ WCN TRN

ChartSmarter

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ChartSmarter
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By:

CMT, Chartered Market Technician

Industrial Misconceptions:

The Dow Jones “Industrials” have put up some strong gains as of late with consecutive 500 point gains. Of course those gains are just better than 2%, but the benchmark has seen some nice capital flow into it recently (912 point gain on 5/18). Over the years the index is not representative of the industrials anymore, but rather technology with AAPL CSCO INTC IBM and MSFT. Consumer names like MCD WMT NKE and DIS, and financials like JPM AXP GS and V. But we must pay attention to potential rotations, and it is still very early, but nascent moves into the Dow over the last 5 days shows a move of 4%. Compare that too the Nasdaq and S&P 500 which have gained .4 and 2.2% over the same time period (the Russell 2000 has advanced 6.6%!). Just over a year ago BA was the highest priced name in the benchmark (it is a price weighted index), it now has 9 of the 30 with stronger prices, but it still carries some influence. Let us take a look at the chart below and see if it can give the Dow a boost going forward.

Boeing stock

Federal Depressed No Longer?

For many years UPS played the role of red headed stepsister, but in recent ones those tables have been turned. Comparing it to FDX, and it still has a few advantages with a dividend yield of 4.1%, more than double FDX’s of 2%. Over the last one year period UPS is higher by 3%, while FDX is LOWER by 18%, and UPS trades 21% off most recent 52 week highs, while FDX is 27% off its own. There are some things to like here with FDX as it displays strong relative strength this week higher by 11.5% (UPS is up just 3% through Wednesday this week), and is testing the round 130 number for the third time since the beginning of April. The transports are seeing broad firmness with rails and truckers, but I think there is room for higher prices with both FDX and UPS. The latter is now testing the very round par figure, and it has poked its head above it a few times but was rejected at an upside gap fill from the 2/21 session. That roadblock may just be temporary however.

FDX Stock

Recent Examples:

Most names were not immune to the early violent sell off this year in the markets, but some came back furiously. Those stocks most likely will be the ones the strongest going forward. There powerful relative strength must be respected, and below is a great example of that with the chart of ODFL, and how it appeared in our 5/7 Industrial Note. It recorded a nice cup base breakout on 5/5, and it was retested in mid May to determine its validity (our stop was 145 and shows the importance of CLOSING PRICES as it was below intraday on 5/14, but finished well above). It is now higher 6 of the last 7 weeks, and this week is showing continued firmness higher by more than 5%. Another positive is that peers are acting well too, not leaving ODFL to shoulder all the weight, with KNX and JBHT just 2% off most recent 52 week highs (WERN and LSTR are 3 and 4% off their respective yearly highs).

ODFL

Special Situations:

  • Waste play UNCH YTD and lower by 4% over last one year period. Dividend yield of .8%.
  • Higher just 5 of last 8 weeks, but two of the advancers were higher by double digits up 16.2 and 10.4% weeks ending 4/10 and 5/8 (all 3 of declining weeks fell less than 2.6%). Peers RSG and WM well below their 200 day SMAs.
  • Three consecutive positive earnings reactions up 6.5, 2.5 and 2.6% on 5/7, 2/13 and 10/29/19.
  • Enter on nice holds above very round number.
  • Entry WCN here.  Stop 89.
WCN
  • Engineering laggard lower by 36% YTD and 10% over last one year period.
  • Now 43% off most recent 52 week highs, and lower 3 of last 5 weeks, but all 3 decliners CLOSED well off intraweek lows. This week showing good relative strength up 14% thus far.
  • Three of last four earnings reactions higher by 3.4, 8.8 and 15.8% on 5/1, 11/1 and 8/2/19 (fell 6.3% on 2/28).
  • Buy pullback into break above bullish ascending triangle.
  • Entry MTZ 41.  Stop 38.
MTZ
  • Railroad equipment play lower by 4% YTD and higher by 3% over last one year period. Dividend yield of 3.6%.
  • Higher 5 of the last 8 weeks, and gains have been powerful. Up another 6.9% this week so far. Nice follow through after previous week gained 9.3%.
  • Three straight positive earnings reactions up 6.9, 5.6 and 1.1% on 4/30, 2/20 and 10/24/19, after back to back double digit losses of 11.6 and 12.1% on 7/25 and 4/25/19.
  • Buy pullback into very round number.
  • Entry TRN 20.65.  Stop 19.
TRN

Entry summaries:

Buy strength above very round number WCN 91.  Stop 89.

Buy pullback into recent break above bullish ascending triangle MTZ 41.  Stop 38.

Buy pullback into very round number TRN 20.65.  Stop 19.

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