JB Hunt (JBHT): Chart and Trade Setup
JB Hunt (JBHT) had a rough day but stays up 76% over the past year, well ahead of the XLI industrial ETF for its sector and the S&P 500.
The weak guidance seems to come from high diesel fuel costs, a problem for the whole industry. The same weakness showed in other freight names: ArcBest (ARCB), Knight-Swift (KNX), Old Dominion (ODFL), and CH Robinson (CHRW). This looks like a broad sector problem, cold water on the ground freight and logistics group.
The Chart
Highs came in just shy of 300. From there price formed a downward sloping channel. Two later high points set the trend line, which was copied across the lows to make the channel shape. Yesterday's move pushed price well below that channel. The day's high looked like it might reenter the channel, but did not.
Key levels:
- Old highs and later lows sit at 254, now a resistance area, with a gap to the upside.
- 271 is another upside level of interest.
- To the downside, old highs and later lows are near where price bottomed yesterday at 235 (first green line).
- Below that, a small gap and lows near 230.
- Another high after a gap, and a low near 221 following an upside breakout.
The 250-day exponential moving average (orange), representing one trading year, is the longest-term and most important moving average. It could give support near 233.40, its level at yesterday's close.
RSI fell below the 50 midline but did not break below 30, the oversold mark. A strong push under 30 would signal more bearishness.
The volume profile shows the next node price is approaching sits between 221 and 230, an old range-bound high area that could give support if price falls into it. Yesterday's move came on very heavy volume. High volume on a big move often marks an important price development.
Example Trade
Options pricing shows an expected move of plus or minus 2.9% for the September 18th (Friday) expiration, only a couple days out. Looking further to October 16th expiration, the expected move is about plus or minus 9.8%.
The diesel fuel news will not be resolved soon, so a more bearish trade that captures the next earnings event on October 15th makes sense.
The trade: buy the October 16th 230/220 put vertical for a 340 debit.
- Bearish outlook, 29 days to expiration.
- Max loss: 340 (the debit paid).
- Max profit: 660, giving nearly a one-to-two risk-to-reward.
- Break even: 226.60, about 4.8% to the downside, inside the roughly 9.8% expected move, so it captures that move well.
- The 220 protective strike sits about 8% to the downside. It would take a bigger than expected move to reach that strike and cap profits.
