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Watch this level in FedEx for signs of a larger breakout, Piper Sandler says

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As transports climb, traders weigh whether Dow theory can apply to this market

FedEx shares were lower Tuesday after hitting a 52-week high earlier in the session.

The stock has rallied 18% this month, getting another boost on Monday after Bernstein said a global recovery depends on the company.

Craig Johnson, chief market technician at Piper Sandler, said the chart suggests even more upside.

"This is a terrific downtrend reversal off of the 2018 highs. You can see that ... the [relative strength] index is improving for FedEx, too," Johnson said Monday on CNBC's "Trading Nation."

In a note to CNBC, he added that a close above $200 would also be bullish. FedEx ended Monday at $199.98. 

The move higher in the entire trucking and logistics group is a positive, Johnson added.

"It's truckload, full carriers, I can see it's logistics companies that are making new highs and relative new highs in the market, this is to me a very bullish sign for the overall economy," Johnson said. "You've also got a nice reversal happening on the IYT where FedEx is about a 10.5% weight inside of that index. So, a lot of positives here."

The IYT transportation index is up 20% so far this quarter. 

Boris Schlossberg, managing director of FX strategy at BK Asset Management, is more cautious on the group. He said its continued outperformance is dependent on the coronavirus pandemic.

"The most recent data has been very encouraging because trucking has potentially come back from the dead, but the trucking trade is basically the un-lockdown trade," Schlossberg said during the same "Trading Nation" segment. "It's basically a bet on the fact that the U.S. consumer is going to return back to retail and the inventory restock is going to follow."

However, with the summer months coming to an end, Schlossberg said any progress made is on shaky ground.

"The weather is going to get colder, more are going to crowd indoors and it may trigger a second wave of Covid. And if that's the case, it doesn't even matter if there's any kind of formal lockdown, the consumer is going to go right back and retrench. And that's going to create a very, very big retracement in trucking as well," said Schlossberg.

The S&P 500 trucking sub industry, which holds J.B. Hunt and Old Dominion, is up 28% in three months. 

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