The major stock indexes have staged one of the sharpest rallies ever seen after an eight week correction. The recent rally has coincided with the ending of the Federal Reserve Bank's quantitative easing program. This QE program is when the central bank was buying U.S. Treasuries from agency banks creating massive cash reserves. Some of these cash reserves certainly got put to work this week as the $600 billion program concluded. Since late June 2010, the major stock market indexes have soared right back up toward the May 2011 highs. One of the leading sectors that has lead the rally has been the Dow Jones Transportation Index. This index surged higher last week, making new all time highs. This week we shall examine some of the leading transportation stocks.
Traders and investors that would like to trade the transportation index can trade the iShares Dow Jones Transportation Index (NYSE:IYT). This ETF will track the sector very closely and is gaining in popularity. Often, when the transport stocks are making new highs it is a sign of global expansion and economic growth. Many Dow theorists will look for the Dow Jones Industrial Average and the transportation index to both make new highs as a confirmation buy signal and another leg higher in the major stock market indexes. At this time the Dow Jones Industrial Average has not yet exceeded the May 2011 top. Traders must now realize that the IYT is very extended and overbought at this time. The IYT has climbed higher by 10.0 percent since making its June 13, 2011 pivot low at $91.67 a share. The IYT will have minor resistance around the $101.50 area in the near term. Should the IYT climb higher traders can watch for resistance around the $106.50 area ,and ultimately the $112.00 level. Potential pullback support areas for the IYT are $96.50, $94.00, and the $92.00 levels.
FedEx Corp. (NYSE:FDX) has been the one of the leading transportation stocks for many years now. This leading transport stock provides package delivery and freight transportation, e-commerce, and business services around the world. This stock has soared higher since June 10, 2011 when the stock traded as low as $84.79 a share. Last week, FedEx stock made a new 52 week high at $98.66 a share. The stock is trading above all of its major moving averages which makes for a strong uptrend on the charts. While the stock is strong on the charts it is very overbought and extended at the moment. These type of patterns will usually need to pullback or consolidate before moving higher. Traders can watch for near term resistance around the $99.00, and $105.00 levels. Should FDX stock pullback in the near term there will be support around the $94.50, and 88.50 levels.
Union Pacific Corp. (NYSE:UNP) is one of the leading freight transport railroad companies in North America. The company has approximately 31,953 route miles linking the Pacific and Gulf Coast ports with the Midwest and eastern United States gateways. The stock made a new all time high on July 7, 2011 at $107.89 a share. Since that high was made the stock has pulled back slightly, closing at $104.30 a share on July 8, 2011. While the stock remains in a strong uptrend on the charts it could see a further pullback in the near term. Traders can watch for short term support around $103.50, $97.75, and $94.00 levels. Should the stock break out to new highs traders can look for resistance around the $110.00, and $116.00 levels.
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