Transports Stock Could Pick Up Steam

UNP pullbacks to its 200-day trendline have been bullish in recent years

by Karee Venema

Published on Dec 7, 2018 at 2:15 PM

Transports have taken a hit during this week's broad-market sell-off, with the Dow Jones Transportation Average (DJT) pacing for its biggest weekly loss since August 2011-- down 7.9% so far. This pullback may have created attractive entry points for some names, with DJT component Union Pacific Corporation (NYSE:UNP) in particular flashing a reliable bull signal.

Specifically, in the wake of a 6.1% retreat from its Monday intraday peak at $159.63, UNP stock is now trading within one standard deviation of its 200-day moving average. According to Schaeffer's Senior Quantitative Analyst Rocky White, in the five other times since 2015 the equity has come this close to its 200-day trendline after a lengthy stretch above it, the shares were up 5.7%, on average, one month later. Plus, three-quarters of those returns were positive.

More broadly speaking, Union Pacific stock has gained 11.3% so far in 2018. However, a retreat from the equity's Sept. 21 record high of $165.63 had the shares breaching a long-term floor at their 120-day moving average, though the 200-day quickly swooped in as support. At last check, UNP is down 1.6% at $149.21.

unp stock daily price chart dec 7

Options traders have been targeting more losses for the railroad stock. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), UNP's 10-day put/call volume ratio of 3.69 ranks in the 100th annual percentile, meaning puts have been bought to open over calls at a faster-than-usual pace.

This skepticism is seen outside of the options pits, too, where nine of 16 analysts maintain a "hold" or "strong sell" rating on UNP. Should UNP stage another sharp bounce off its 200-day moving average, a capitulation from some of the weaker bearish hands and/or a round of upgrades could create short-term tailwinds for the shares.

START YOUR DAY SMARTER.

Get Schaeffer's pre-market news bulletin every morning before the bell rings.
It's free to sign up.


Partnercenter


NEW! Explore Schaeffer’s Partners' deals and get connected to top online brokerages with deals tailored exclusively for our readers.  Get answers to your questions regarding transfer fees, commission rates, programs and available discounts related to online trading services.

MORE | MARKETstories


Exercising the First Amendment for 2020
Take advantage of the first amendment, and participate in a nation-wide poll.
Options Traders Think Shaq a Slam Dunk for Papa John's
Plus, Nokia options pits come alive amid probe
Turkey ETF Gets Crushed, Put Volume Soars
Traders are digesting negative headlines about Turkey-U.S. relations
Choosing the Right Online Broker
Click to continue to advertiser's site.