Old Dominion Freight Lines – Refueling or Out of Gas

• Posted by Greg Harmon
• on April 9th, 2015

The transportation stocks have yet to make a new high and so are helping to put a damper on the broad market party. This lack of confirmation is causing many to call a top in the market as they just wait for the final rollover. Frankly, if the transports did make a new high many of these people would find another reason that the market will fall, but that is another story.

One piece of the of that index, trucking stocks, has been very strong. And one that I follow, Old Dominion Freight Line ($ODFL), has been on fire since the 2009 market low. The stock rose tenfold from 8 to over 80. From a glance at the chart below you can see the strong trend higher until December last year.

That is when it and the transports started to consolidate, or rest in trader parlance. But a closer look at that chart shows something very interesting. The red line is the 200 day SMA (simple moving average). Notice that the price is moving below this week. This is the first time since October 2012 that the price has been below the 200 day SMA. In fact if you go back to the 2009 low the stock price really does not like being below the 200 day SMA. Of the about 1800 trading days since then, the stock has been below the 200 day SMA about 100 days. Less than 6% of the time.

So as the stock price is moving below the 200 day SMA for the first time in 2 and a half years, against the backdrop of a transportation index that is failing to show strength, the question comes out. Is Old Dominion refueling her like every other time for the last 6 years, or is the rally done?

With the momentum indicators oversold and at prior extreme levels (also seen within that 100 day period), it might be a good time for a trader to get long the name against the January low as a stop. But if the market erodes a short against a stop at 72.50 also give a good reward to risk. How will you express your view?

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