Bearish Candlesticks Circling JB Hunt

06/24/08 11:23:05 AM

by Arthur Hill

JB Hunt is holding up surprisingly well over the last few weeks, but signs of selling pressure are starting to emerge and a support break looks imminent.

Security: JBHT
Position: Sell

Figure 1 shows JB Hunt (JBHT) with three bearish candlestick reversal patterns in May. Even though the stock did not fully break down in June, these bearish candlesticks reinforce resistance and point to overhead supply (selling pressure). The first two are bearish engulfing patterns. The third is a harami in late May. These three candlesticks marked the highs in May and the June highs were lower.

FIGURE 1: JBHT, DAILY. Even though the stock did not fully break down in July, these bearish candlesticks reinforce resistance and point to overhead supply.

Graphic provided by: TeleChart2007.

Despite the bearish candlesticks, JB Hunt held up in June and formed a triangle consolidation. Watch for a break from this pattern for the next signal. An upside breakout would be bullish, while a downside break would be bearish. Given the bearish candlestick patterns in May and overall market performance, the odds favor a downside break.

Figure 2 shows JBHT in 2008 with volume and the on-balance volume (OBV) indicator. After moving sideways in May and June, the stock is trading at support from the January trendline. This trendline was touched at least three times, which makes it valid. In addition, the trendline confirms support from the June lows and a break would be bearish.

FIGURE 2: JBHT, DAILY. After moving sideways in May and June, the stock is trading at support from the January trendline.

Graphic provided by: TeleChart2007.

The bottom indicator shows OBV. While JB Hunt moved to new highs in May, OBV formed a lower high in May and did not confirm strength in the stock. Volume is not keeping pace and this is a warning sign. Price action is first and foremost, though. Look for a break below the June lows to reverse the current uptrend.

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.

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Bearish Candlesticks Circling JB Hunt

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