Test This Theory
The Dow Jones Transportation Average and the Dow Jones Industrial Average both made fresh- highs Friday, a classic bullish sign for investors who follow the charts. What does it mean going forward?
Dan Fitzpatrick is Co-Contributor and Technical Analyst for TheStreet.com as well as President, StockMarketMentor.com. Following is a summary of his main points.
Is this a clear buy signal?
Yes, providing we see more volume and if we see the Dow Industrials test their break-out. Also we need the iShares Dow Jones US Financial to make new highs because that’s a larger percentage of the DJIA than it used to be.
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What’s our next stop higher?
It could be 14,000. If this is a buy signal the shorts will start buying to unwind their trades, theorizes Fitzpatrick.
Are the transports a good tell for the end of recession?
They usually are, replies Fitzpatrick. My rule of thumb is six months. If we get that break-out, I would look for a pick-up in the economy toward the end of this year.
I think the “tell’ in transports is FedEx, says Guy Adami. The stock could trade at $100 by the second half of the year. And I also like UPS for the second part of ’08.
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Trader disclosure: On Apr. 18, 2008, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Macke Owns (DIS), (INTC), (MSFT), (YHOO); Najarian Owns (AAPL), (AMR), (BIIB), (CSCO), (MSFT), (NOK), (TSO), (XLF), (YHOO), (ETFC), (EMC), (NVS); Najarian Owns (BKC); Najarian Owns (BHI) Calls, (BSC) Calls, (COP) Calls, (DD) Calls; Finerman Owns (GS); Finerman's Firm Owns (JCP), (MSFT), (NOK), (PZN), (TSO), (VCLK), (VLO), (YHOO), (GE), (NOK); Finerman's Firm Owns (FNM) Calls; Finerman's Firm Is Short (COF); Charles Schwab Is A Sponsor Of "Fast Money"; GE Is The Parent Company Of CNBC
Fitzpatrick Owns (BNI), (X), (RIG), (ACI), (MON), (POT), (TRA)