A Potential Triumph for the Transportation Sector
This article was originally published on ETFTrends.com.
The iShares Transportation Average ETF (CBOE: IYT) is down more than 5% year-to-date, but the downtrodden transportation could be ready to trend higher.
IYT tracks the Dow Jones Transportation Average (DJT). Transportation stocks were expected to benefit from lower oil prices and while that has been the case for airline stocks, other industry groups represented in IYT, including railroads.
Going forward, the allure of infrastructure investing, which investors can easily engage in via exchange traded funds, could and should rise as governments around the world finally commit the capital necessary to upgraded dated and dangerous bridges, pipelines and roads. In the near-term, however, transportation investments could remain challenged.
One of IYT's marquee railroad holdings – Union Pacific (UNP) – could be ready to rally.
“Specifically, in the wake of a 6.1% retreat from its Monday intraday peak at $159.63, UNP stock is now trading within one standard deviation of its 200-day moving average,” reports Schaeffer's Investment Research.
Why It's Important
Union Pacific, one of the largest U.S. railroad operators, is IYT's third-largest holdings, commanding almost 9% of the ETF's roster.
“According to Schaeffer's Senior Quantitative Analyst Rocky White, in the five other times since 2015 the equity has come this close to its 200-day trendline after a lengthy stretch above it, the shares were up 5.7%, on average, one month later. Plus, three-quarters of those returns were positive,” notes Schaeffer's.
Data suggest some options traders are getting bearish on Union Pacific.
“Options traders have been targeting more losses for the railroad stock. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), UNP's 10-day put/call volume ratio of 3.69 ranks in the 100th annual percentile, meaning puts have been bought to open over calls at a faster-than-usual pace,” according to Schaeffer's.
IYT is down 14.40% in the current quarter.
For more information on Transportation ETFs, visit our Transportation category.
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