The Stock TransForce Inc.
Recent price $7.46
Trend Transportation stocks, often a barometer of economic vitality, are setting the stage for a promising autumn in the stock market. The Dow Jones transport index has been categorized as Stock Trends Bullish for two months now, driving ahead a leading 6 per cent last week on the strength of a positive outlook from bellwether FedEx Corp. Impressive jumps last week by transport logistics stocks like Ryder System Inc. and J.B. Hunt Transport Services Inc. were fuelled by this flourish of optimism.
It delivered some bullish moves by Canadian concerns, as well. Logistics software supplier Descartes Systems Group, profiled by this column in early June, rallied 20 per cent off its 13-week moving average trend line last week. Canadian transports, in general, should reflect the prospects for the economy, but despite building optimism about the door closing on a nasty recession, their stock prices have floundered this summer. But now could be a time to hop on these truckers.
The Trade TransForce is a leading Canadian logistics and trucking company that had a busy summer with an equity financing and a recently announced courier acquisition. Technically, the company's stock broke out of its bear trend in the spring, turning Stock Trends Bullish in mid-June after the shares had rallied to $6.19 from a bear market low of $2.78.
TransForce shares have fallen off this month from the August peak of $7.97, and last week's added vigour in the sector south of the border did not translate positively for the company's stock. It finished a second successive week in the red. Investors can now look to the bullish trend line for guidance. TransForce's retreat off of its summer high is an opportunity to buy on price weakness. Support at the 13-week moving average trend line is 9 per cent below the current price, but investors can buy in anticipation of a rally back to the $8 level.
The Upside This trade is dependent upon a revival in the energy and industrial sectors of the economy to sustain a long-term upward trend in stock prices, but short-term expectations could also give investors a profitable turn at this trucker.
A move ahead by TransForce's share price above the $8 resistance level would open the way for an advance to the next obstacle at $9.15, a 2008 summer rally lid that coincided with the market collapse that sent TransForce back on its bearish path last year. Positive signals that truck tonnage is on the upswing could make $8 a pit stop as the stock's valuation improves. Still, a 20-per-cent rally off trend-line support to this technical roadblock is an enticing short-term potential.
The Downside The stark reality of every trade is that you may be wrong - wrong about the market, wrong about the sector, wrong about the stock. This trade will let you know soon. Failure to rally off the trend line will change TransForce's Stock Trends indicator to Weak Bullish at $6.50, a signal that the trade should be exited. Readers can follow TransForce's Stock Trends indicator in the Saturday TSX listings of The Globe and Mail.
Skot Kortje has been analyzing stock market trends for 15-years using trend analysis. His Stock Trends indicators have been published by The Globe and Mail since 1995. For more go to Stocktrends.ca .