This Sector Is Poised for a Huge Reversal
By Jeff Clark
January 19, 2010

Transportation stocks are running out of gas.

The Dow Jones Transportation Average has rallied nearly 20% in just the past 10 weeks. Airlines, railroads, trucking, and delivery service stocks have raced higher without obstruction, like Ferraris on the Autobahn. But the fuel gauge is now on "E," and it's time for a pit stop.

Take a look at this chart of the bullish percent index for the transportation sector (BPTRAN)...

As you can see from the above chart, the BPI for the transportation sector recently hit as high as 95. It's almost mathematically impossible for it to rise more than that. The BPTRAN turned down last week. And recently, it dropped below its 20-day moving average.

Moving-average crossovers have worked well to trigger buy and sell signals in the past. For example, back in September, the BPTRAN ran into overbought territory (above 80) and then turned lower and dropped below the 20-day moving average.

The Second Shoe Is About to Drop on the Banks A Major Uptrend Is Just Getting Started in This Hated Asset

Transport stocks then entered a short-term decline phase. The Dow Jones Transportation Average dropped from a high of about 4,100 to 3,600 – a decline of 12% – in just six weeks.

We have a similar setup today.

If you own transportation stocks, you might consider taking some of the recent fast profits off the table. Aggressive traders should think about shorting the sector. The coming pullback could mean big profits.

Best regards and good trading,

Jeff Clark

Editor's note: Jeff recently told his Short Report subscribers about a trade that could soar as the transportation sector declines. This is a speculative trade, so it's not for everyone. But it could return up to 335%. To learn more about Short Report – and get access to Jeff's trade – click here.