The Potential in the Transports in 3 Concepts
- Posted by Greg Harmon
- on March 4th, 2014
As the month closes it is often a good time to step back and take a broader perspective on the markets. If you do that with the Dow Jones Transportation Average Index ($TRAN) there are three simple guiding characteristics that you need to watch to stay on the right side of the market in transportation stocks. Everyone is familiar with the Head and Shoulders Pattern and there is one in the Transports, it is just upside down. The monthly chart below shows this, with the Neckline at about the 5600 level. What is important to know about this technical pattern is that it looks for a move up to 9050 at least (you get there from measuring the distance from the tip of the Head to the Neckline and adding it to the Neckline higher). That is still a long way to go to the upside. The second thing is what is called a Measured Move. This is Technical Analyst jargon to describe that the move in the Transports on the blue arrow added again to the consolidation over the last few
months would target a level of 10050 were it to happen again, and these types of symmetrical moves do happen often. This would be in play on a move above the consolidation zone, over 7500. The third concept to understand is that the first two are not guarantees. That means that the Transports may not reach those levels, but it also means that it could reverse and move lower. That is the more interesting scenario. And a move below the red consolidation zone, below 7000 is a signal to reverse course and look lower. That would give two immediate targets: 6250 and then the Neckline at 5650. Clean and simple. Use it as a guide for the transportation ETF, $IYT, or for your transportation stocks.
Get my book, Trading Options: Using Technical Analysis to Design Winning Options Trades from Amazon.
Dragonfly Capital Views Book Launch Celebration
For a Limited the Opportunity to join the Dragonfly Capital Views Premium Membership on an Annual basis is available for only $618.
This special Fibonacci rate (1000 divided by Φ) will be gone soon. Don’t miss this opportunity to join or upgrade! Sign up here. As part of this celebration, the first 25 annual subscriptions will also get the book*.
*book will be sent after payment is processed. It will also require you to send me your address for delivery.
Want to learn more about Dragonfly Capital Views?
Dragonfly Capital Views Performance Through February 2014 Expiry and sign up here for the free 7 day trial before you pay.
If you like what you see above sign up for deeper analysis and trading strategy by using the Get Premium button above. As always you can see details of individual charts and more on my StockTwits page.
The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.blog comments powered by Disqus
Gregory W. Harmon CMT, CFA, has traded in the Securities markets since 1986. He has held senior positions including Head of Global Trading, Head of Product Development, Head of Strategy and Director of Equity. (More)
- Top Trade Ideas for the Week April 27, 2015: Bonus Idea
- Top Trade Ideas for the Week of April 27, 2015: The Rest Premium
- Top Trade Ideas for the Week of April 27, 2015: The Rest
- Top Trade Ideas for the Week of April 27, 2015: The Best
- SPY Trends and Influencers April 25, 2015
- Macro Week in Review/Preview April 24, 2015
- Protect your Apple Stock through Earnings
- Forget the stock market adage buy low and sell high
- Unlocked: Amazon and Starbucks premium earnings trades
- Dressing an earnings trade in Hanesbrands