Dow Jones Transportation Average Approaching Key Resistance Zone

By Jim Donnelly, Olson Global Markets

After posting five straight monthly gains, the Dow Jones Transportation Average (DJT) has leaped by more that 30% since its November 16, 2012 low of 4,838. Moreover, the rally since November appears to have characteristics of a “parabolic move” that technically suggests the DJT might carry a bit higher before entering into a correction phase.

With that in mind, it is worth pointing out that DJT appears to be aimed for a test of two separate trend line resistance levels that currently sit at 6,400 and 6,550 respectively. Those resistance points represent gains of 3.57% and 6% from Friday’s close. Although its chart suggests that it is likely there is more “room to go” on the upside, those levels are close enough to begin to think about getting a bit defensive.

Transportation names like C.H. Robinson (CHRW) and FedEx (FDX) and have recently posted disappointing earnings results and the price action of Expeditors International of Washington (EXPD) appears to be struggling to find support. Yet, a name like Jet Blue Airways (JBLU) appears poised to “breakout” to the upside soon.

There are, however, a number of stocks within the Dow Jones Transportation Average that now appear aimed for a test of their long-term resistance levels as well. They include: J.B. Hunt Transport Services, Inc. (JBHT); Norfolk Southern Corporation (NSC); and Union Pacific Corporation (UNP).

Still, others names like Kirby Corporation (KEX) and Alaska Air Group, Inc., (ALK) are at all-time highs but appear to have a bit more upside yet unfold.

Needless to say, the Dow Jones Transportation Average itself is within striking distance of two forms of trend line resistance that are importation. What is equally important is the fact that transportation stocks have outpaced both the Dow Jones Industrial Average and the S&P 500 Index to the upside this year. If transportation stocks find resistance soon, there is a reasonable chance that advance in the broader market might run into turbulence too.

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