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GAPS


JB Hunt Takes A Leap

01/04/07 08:12:13 AM
by Arthur Hill

A gap off support looks promising for JB Hunt, but let's see some follow-through above resistance before really getting excited.

Security:   JBHT
Position:   Hold

JB Hunt (JBHT) started the first trading day of 2007 with a bang. The stock gapped up and closed strong on the highest volume since October 2006. The gap was definitely positive, but the stock has yet to break free of a two-month consolidation, and follow-through is needed to forge a true breakout.

On the daily chart (Figure 1), the stock surged in September–October and then consolidated from mid-October to late December. The pattern looks like a falling wedge of sorts, with resistance from the November high and support from the December low. Support around 20.5 is affirmed by broken resistance or the mid-September high. Broken resistance often turns into support, and a pullback to the breakout is quite normal.

FIGURE 1: JB HUNT, DAILY. JBHT surged in September–October before consolidating from mid-October until late December.
Graphic provided by: Telechart 2007.
 
The pattern and the pullback look normal for a correction, but a correction is not over until there is a breakout. The January 3rd gap reinforces support at 20.5 and the bulls have the edge as long as the gap holds. Even so, there is still resistance around 22.5–23 from the October–December highs (Figure 2). I would like to see follow-through with a move above 23 to complete a breakout and call for a continuation of the September–October advance.

FIGURE 2: JB HUNT, DAILY. The bulls have the edge as long as the gap of January 3 holds. Even so, there is still resistance around 22.5–23 from the October–December highs.
Graphic provided by: Telechart 2007.
 
Upon a breakout, the upside target would be around 26. Resistance in this area stems from the February–July 2006 highs. The broken resistance around 22.5–23 would then turn into support, and I would expect a strong stock to hold broken resistance. A move back below 22.5 would put the breakout in jeopardy of failure.



Arthur Hill

Arthur Hill is currently editor of TDTrader.com, a website specializing in trading strategies, sector/industry specific breadth stats and overall technical analysis. He passed the Society of Technical Analysts (STA London) diploma exam with distinction is a Certified Financial Technician (CFTe). Prior to TD Trader, he was the Chief Technical Analyst for Stockcharts.com and the main contributor to the ChartSchool.

Title: Editor
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Date: 01/04/07Rank: 4Comment: 
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