Transports Are Truckin' Ahead of Earnings

Tickers in this article: CNW CSX FDX NSC ODFL

NEW YORK ( TheStreet) -- Today I profile eight transportation stocks, seven of which report quarterly results in coming weeks.

The Dow Jones Transportation Average has made quite a recovery in recent months.

Back on Nov. 16, the transports were poised for a 2012 closing low, but during that session the stock market reversed direction as investors became convinced that politicians would avert a fiscal cliff.

On Dec. 24 I wrote " Transports Shift Into Fast Lane ," with the theme that even after earnings warnings the transportation sector was ripe for a technical momentum run-up.

Right now the transportation sector is not cheap, as my Web site, www.ValuEngine.com, shows the sector nearly 19% overvalued.

The Dow Jones Transportation Average ended Tuesday with a new all-time closing high at 5639.64. Some technicians call this the first condition for a Dow theory buy signal. Transports are far ahead of industrials, as the Dow Jones Industrial Average remains below its 2012 closing high of 13,610.15, set on Oct. 5.

Dow Theory has not had consistent calls since 2011, so in my judgment the Dow Jones Industrial Average needs to set a new all-time closing high above the current closing high of 14,164.53 set on Oct. 9, 2007. This would be a macro confirmation of a Dow theory buy signal.

The daily chart above of the Dow Jones Transportation Average shows an extreme overbought reading with its 12x3x3 daily slow stochastic reading at 93.56, well above the 80.00 overbought threshold on a scale of 00.00 to 100.00. My quarterly value level lags at 5094 with my annual pivot at 5469 and annual risky level at 5925. Beware of false signals, as I show an 85% chance of a return to 5469 in 2013.

Reading the Table

OV/UN Valued : The stocks with a red number are undervalued by this percentage. Those with a black number are overvalued by this percentage, according to ValuEngine.

VE Rating : A "1-Engine" rating is a strong sell, a "2-Engine" rating is a sell, a "3-Engine" rating is a hold, a "4-Engine" rating is a buy and a "5-Engine" rating is a strong buy.

Last 12-Month Return (%) : Stocks with a red number declined by that percentage over the last 12 months. Stocks with a black number increased by that percentage over the past 12 months.

Forecast One-Year Return : Stocks with a red number are projected to decline by that percentage over the next 12 months. Stocks with a black number in the table are projected to move higher by that percentage over the next 12 months.

Price-to-earnings ratios appear elevated.

Value Level : the price at which to enter a good-'til-canceled limit order to buy on weakness. The letters mean: W-Weekly, M-Monthly, Q-Quarterly, S-Semiannual and A-Annual.