In yesterday’s article I discussed the S&P 500 sectors performance and shed some light on the industrial sector, which I see as a potential outperformer into year-end. Today, let us look at one industrial stock to like and one to dislike into the last few trading weeks of 2012.
Should stocks continue to drift higher into the end of the year then it would be difficult to imagine the industrial sector not participating, and as described yesterday, given its relative strength, maybe even leading the Santa Claus rally.
Ryder System (R) has given technical analysts much to like as of late and continues to look promising for further gains. The stock has rallied sharply off its recent low in July, yet still remains -11% for the year, and thus underperforming the industrial sector, SPDR Industrial Index (XLI), which is higher by almost 9% year to date.
The rally off the July lows has moved the stock right into the 61.80% Fibonacci Retracement level of the move from the February highs to the July lows. The first try at breaking through this resistance area near $48 failed in early November, but the stock has since consolidated and is now at its second attempt to break above. Given the still not overbought levels in the stock’s RSI indicator and the stock’s aforementioned relative weakness to the industrials index, a rally in the broader market just might mean that Ryder System (R) could play catch-up with the index and break above the $48 resistance zone.
Other stocks such as Equifax Inc (EFX) are way ahead of the industrial sector in terms of performance year to date. This stock hit a new 52 week intra-day high on Monday and is higher by almost 38% on the year.
After consolidating through the summer, the stock again accelerated its upward move in late September and on Monday December 3rd gapped-up and leaped a vertical 8.40%, yet ended the day up ‘only’ 4.20%. The intraday sell-off resulted in a classic shooting star candle on the daily chart, which is recognized by its long tail in relation to its body. The oscillators too signal a few concerns as the RSI indicator is in well-overbought territory and the stochastics have shown negative divergence to price since mid October (higher high in price yet lower highs in stochastics). The current setup may allow agressive traders to short the stock with a defined stop at Monday’s highs. For everyone else the just-described warning signals may just be enough to stay away from this stock on the long side into year end, at least on a relative basis to the industrials sector overall.
So there you have it, the choice is Ryder System (R) if you’re up for a thrill and away from Equifax (EFX) if you wanna sit still. Common, it’s the holidays…I’m allowed to sneak-in a rhyme here and there.