Transport Stock Looks Ready to Roll
11/22/2011 9:00 am EST
A potential breakout from a recent range could send JB Hunt (JBHT) on a path higher, and willing traders can buy the stock outright or use an options strategy to capitalize on this opportunity.
JB Hunt Transportation Services (JBHT) looks ready to break out of a consolidation range.
It has a Relative Strength Index (RSI) that is holding bullish after testing the mid line and a Moving Average Convergence Divergence (MACD) indicator that is about to cross bullishly positive. Both support more upside.
See related: Demystifying the MACD
There is resistance higher at $44.80 followed by $46, $47, and $48.50. Support lower comes at $42.80 followed by $42.10 and then $41. This is a good trade on the long side on a move above $44. Use a 3% trailing stop and take some profits on a touch of the $46 level.
For an options alternative, consider the December 45/40 bullish risk reversal using the same trigger and buying the December 45 call and selling the December 40 put to create the risk reversal.
This was offered recently at 60 cents, but be sure to check current pricing before executing any trade. On a quick move higher, the 45 calls can be rolled higher to 50 calls to take profits and still participate in further upside.
By Greg Harmon of Dragonfly Capital