UNP Could be a Catalyst for the Transports in 2020


  • Transports continue to lag...and remain range-bound.
  • They also remain 8% below their 2018 all-time highs.
  • 11,000 and 11,500 are the two resistance levels to watch.
  • A breakout in UNP should be a positive catalyst for this group.


The transportation stocks have been lagging the broad market for most of this year. If 2020 is going to be another good year for the stock market (like it frequently is in an election year), the DJ Transportation Index is going to have to play catch-up.

We were asked by CNBC to touch on the key levels to watch on the TRAN index for signs that it is indeed going to regain its lost momentum. We were also asked if we liked one name that could provide a catalyst for the sector. (You can see the video of interview from this afternoon below.)

In the interview, we highlighted two levels for the TRAN. The first one is the 11,000 level. That is the upper-end of the sideways range the transports have been trading in for over ten months now. A break above that range will indeed be positive, but we'd still have to see it rally further and break above its all-time highs from 2018 to confirm that a breakout has take place (and to give us a "Dow Theory buy-signal").


As for an individual stock, I chose Union Pacific (UNP). It's all time high of $180 has provided VERY stubborn resistance for the stock since the spring. It has tested that level three different times, but has failed to break above it on all three occasions. Therefore, if it can finally break above $180 in any meaningful way, it's going to be very bullish for UNP on a technical basis. Since the S&P 500 Railroad is not all that far from its record highs, a breakout in UNP should help the railroad group as well....and a breakout in the rails, in turn, should be bullish for the transports in general.


The odds of all of these stocks and indexes breaking out before year-end are quite low...and UNP & the rails in general have had a few rough days this week. However this is still something we'll be watching as we move into the New Year. There is no question that a breakout in the TRAN would be a very bullish development for the stock market if it can make that move early in 2020, so it's something we'll be watching very closely in the weeks ahead.


To see my interview on CNBC this afternoon, click below (or check the "Popular Video" section on the Marketfy website).

https://www.cnbc.com/video/2019/12/04/trading-nati...




Matthew J. Maley

Managing Director

Chief Market Strategist

Miller Tabak + Co., LLC

Founder, The Maley Report

TheMaleyReport.com

275 Grove St. Suite 2-400

Newton, MA 02466

617-663-5381

mmaley@millertabak.com


Although the information contained in this report (not including disclosures contained herein) has been obtained from sources we believe to be reliable, the accuracy and completeness of such information and the opinions expressed herein cannot be guaranteed. This report is for informational purposes only and under no circumstances is it to be construed as an offer to sell, or a solicitation to buy, any security. Any recommendation contained in this report may not be appropriate for all investors. Trading options is not suitable for all investors and may involve risk of loss. Additional information is available upon request or by contacting us at Miller Tabak + Co., LLC, 200 Park Ave. Suite 1700, New York, NY 10166.

Posted to The Maley Report on Dec 04, 2019 — 4:12 PM
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