Good Offense Means Strong Defense:
The industrial conversation is often dominated by the transport names like the rails, airlines or truckers (JBHT threw is a clunker this week after earnings and is down more than 7% this week thus far). A space that has not garnered much attention recently are the defense names. The stocks have been bifurcated with GD and RTN down 24 and 21% from their most recent 52 week highs, but LLL is off just 4% from its recent peak. It is trading right at a 215.46 cup with handle breakout pivot taken out on 4/12. Let us take a peek at the chart of the ITA ETF. BA has weighed on the fund, but other components are giving the charts complexion a decent look.
Destination Unknown:
What determines a stocks value? Fundamental investors will declare its the balance sheet, management, etc. Technicians simply follow PRICE action. Both are correct, and both work, but the ultimate arbiter is PRICE as that is how one is viewed correct or not. Let us look at a ratio chart of two trucking names comparing ODFL to JBHT. The recent vertical move was a reaction to JBHT’s earnings report, but overall why is JBHT now 25% off most recent 52 week highs and ODFL is just 8%. Was it an inferior management team? Whatever the reason, it is irrelevant. PRICE tells you all you need to know. Buy strength and sell weakness.
Examples:
Federal Express used to be the clear leader in the delivery space. To be frank there are not a plethora of names to monitor in the space, but this name was also a global economic bellwether. That may not be the case anymore as the stock currently trades well into bear market mode down 26% from most recent 52 week highs. Rival UPS is acting better but on a YTD basis FDX has risen more higher by 23% as opposed to UPS up by 18%. Sure it is from a much lower plateau, and below is the chart of FDX and how it appeared in our 4/12 Industrial Report. It is coming into a gap fill at the very round 200 number from the 12/7/18 session, and should be very telling how it acts there.