D.J. Transportation Average component J.B. Hunt Transport Services, Inc. (JBHT) opened at a 5-month low on Monday morning, following a first-quarter earnings report that beat EPS estimates but just missed revenues, despite 6% year-over-year growth. The stock bounced strongly in the first hour, continuing a 4-week test at 50-week and 200-day EMA support in the upper-80s.
The mixed metrics could set a somber seasonal tone for the transportation sector, which faces multiple crosswinds due to expected policy changes in the Oval office. NAFTA has been a huge moneymaker for the trucking and railroad industries in recent years, with renegotiation having the power to significantly lower shipment levels. At the same time, bulls hope that tax and regulatory reform will underpin industry profits through a broad economic upturn.
JBHT Long-term Chart (1993–2017)
A long uptrend topped out at $5.50 in 1987, giving way to a broad sideways pattern that tested the high in 1992. The trading range expanded to $6.69 but failed to yield a breakout, with that level hindering progress into a 1998 rally that stretched the range another few points. Laggard behavior continued into 2003 when the stock finally broke out, entering a powerful trend advance that coincided with the mid-decade bull market.
The uptrend ended just above $40 in August 2008, giving way to a decline that accelerated during the economic collapse. It found support in the upper-teens in March 2009 and spent the next two years completing a round trip into the prior decade’s high. Months of testing around that level yielded a 2012 breakout that stair stepped to the April 2015 high at $93.50, ahead of an intermediate correction that posted a 3-year low at $63.58 in January 2016.
The stock returned to the 2015 high in the fourth quarter of 2016 and broke out, reaching an all-time high in triple digits in December. Price action since that time has been horrific, with a 3-month sideways pattern breaking down in March and failing the breakout. It’s posted a 7% decline so far this year and now risks carving a multiyear double top, ahead of a secular downturn.
The monthly Stochastics oscillator posted a buy signal in the first quarter of 2016 and whipsawed through the middle of the year. It turned higher into 2017 and finally reached the overbought level in January. The indicator then crossed into the first major sell signal since May 2015, raising odds for at least six to nine months of lower prices. In turn, this confirms the 2016 breakout has failed, exposing a decline into the rising trendline near $80.
JBHT Short-Term Chart (2015–2017)
The stock ran in place in the upper-70s between early 2013 and November 2014 when it broke out, reaching the rally peak at $93.50 just 5-months later. The subsequent decline violated 2013/14 support quickly (red line) and bounced at the rising trendline in place since the 2009 low. The subsequent recovery unfolded in two waves, with the second buying impulse yielding the late year breakout to an all-time high at $102.38.
On Balance Volume (OBV) topped out in 2014 and posted a lower high in the first half of 2015. It dropped off a cliff after the Brexit referendum, finally bottoming out in the first quarter of 2016. Subsequent buying power failed to overcome the prior deficit, with December’s breakout triggering a bearish divergence that signaled weak institutional sponsorship. That red flag has now come home to roost in a downturn that could relinquish many more points in 2017.
The Bottom Line
J.B. Hunt Transport is trading higher after a mixed earnings report, with bulls taking a stand at long-term support. Even so, the first quarter’s failed breakout should continue to weigh on shares, with the current uptick unlikely to gather traction.
<Disclosure: the author held no positions in aforementioned stocks at the time of publication.>