The transportation and logistics company based in Lowell, Arkansas, J B Hunt Transport Services Inc. (NASDAQ: JBHT) seems to be ready for a price correction in the near term according to its latest charts.
Bearish Move – Chart Indications
#1 Rising Wedge Pattern: The daily chart shows that the stock has been forming a rising wedge pattern during the past few weeks. This is a bearish pattern and is marked in purple color lines in the daily chart. The stock is currently near the top of the rising wedge pattern. Once the stock breaks down from this pattern, it has the potential to move lower in the near-term.
Daily Chart – JBHT
#2 Bearish Candles: The last two candles formed in the daily chart are bearish candles, indicating that there is a selling pressure at higher prices. This is a possible bearish sign.
#3 Bearish Divergence between CCI and Price: The daily chart shows that there is a bearish divergence between the CCI indicator and price.
This divergence is marked as blue dotted lines.
While the price was making higher highs, CCI was forming lower highs.
This usually foretells the start of an upcoming bearish move.
#4 Overbought RSI moving down: The daily chart shows that the RSI is currently near overbought levels and starting to move down. This indicates a possible weakness in the current trend.
#5 Supply area: The weekly chart shows that the stock is currently near a supply area, which is marked as an orange color ellipse. The stock had formed long tails during the past few weeks but was not able to cross above this level. Whenever the stock attempted to cross above the top of this supply area, it bounced back down, indicating that there is a distribution happening at this level. This is a possible bearish sign.
Weekly Chart – JBHT
#6 Bearish RSI: In the weekly chart as well, the RSI is currently at overbought levels and looks ready for a downward move. This is also a possible bearish sign.
Recommended Trade (based on the charts)
Sell Levels: If you want to get in on this trade, you can take short positions on JBHT if the stock trades below the price of $137.
TP: Our first target price is $130. If the stock breaks down below the TP#1, the second target price is $120.
SL: To limit risk, place a stop loss at $141. Note that this stop loss is on a closing basis.
Our target potential downside is 5% to 12% in the next 3-6 months.
For a risk of $4.00, our target rewards are $7.00 and $17.00. This is a nearly 1:2 and 1:4 risk-reward trade.
In other words, this trade offers nearly 2x to 4x rewards compared to the risks.
Risks to Consider
The stock may reverse its overall trend if it breaks upwards from the rising wedge pattern with high volume. The breakout of the stock could also be triggered in case of any positive news, overall strength in the market, or any regulatory changes in its sector.
Happy Trading!
Tara
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