Pick Strength With TGH

06/24/21 02:15:16 PM

by Billy Williams

The damage to the supply chain and doubt about the future should cause you to pick strength over growth, and one stock fits the bill

Security: TGH
Position: Buy

The bulls seem to be stalling but, overall, the market continues to go higher. However, as the wall of anxiety grows steeper for the bulls to climb, one question is being asked more frequently — how much longer can it continue?

Even though pent-up consumer demand is starting to gain traction, unemployment continues to be a thorn in the economy's side. And while the public is ready to spend, its drive is being tempered by a future outlook that is unclear.

No economy can outrun bad fundamentals over the long term which should shift your attention from growth to strength.

It also helps to find companies that exist on the periphery, or outside the immediate view of the market. Companies that are not in plain view and go beyond to the not-so-obvious sectors of the market where the real potential exists.

To find solid trade ideas, it pays to look beyond the surface-level rise in earnings in consumer durables and retail. Companies that have built-in protective moats that protect earnings power while commanding competitive rates for their goods and services.

Figure 1. TGH bounced off long-term support and has been steadily climbing back to reclaim it's all-time price high.

Graphic provided by: TC2000.com.

Considering that, the international supply chain has been hit hard in the last year. Further, companies that help drive those supply lines stand to benefit from pent-up consumer demand.

Walking through any major department store or supply center and you can see that shelves have noticeable gaps where products used to be. Grocery stores are playing catch-up to keep dry goods and canned goods on the shelves, but many of their suppliers were shut down during the lockdown. Worse, many more won't return to the marketplace.

And, of the goods that remain, they are more expensive thanks to a combination of rising inflation and just good ol' supply & demand.

Textainer Group Holdings Limited (TGH) is the Rental & Leading Services Industry leader, an otherwise unnoticed and dull industrial sector. But, the stock also serves a badly underserved supply chain throughout the world and has a lock on 2.4 million shipping containers. This puts the company at the forefront of restarting the international supply chain and insulating itself from the toxic effects of inflation.

Figure 2. On the weekly chart, you can see that TGH has broken out of consolidation and been a bull run where it's been marked up in price. So far, all indications point higher.

Graphic provided by: TC2000.com.

The stock went through a period of price consolidation just after the severe market discount of April 2020. This consolidation period showed that TGH was under accumulation leading to its breakout to the upside and the bullish trend that followed.

The stock's upward trend formed a steady series of higher highs and higher lows where it appears to continue trading to the upside. It's worth noting that, while the general market trades back and forth, TGH continues to show strength to the upside.

Now, the stock has broken out higher on greater volume to a new annual price high which reveals the bulls are taking the stock higher.

Figure 3. On the daily chart, TGH has broken out from a combination of price consolidation and low volatility. Price action reveals a brief pullback and a possible retesting of minor support at the previous high. Given that the stock is trading higher, both price points are actionable long signals.

Graphic provided by: TC2000.com.

TGH has pulled back slightly and appears ready to test minor support at $31.73. However, if price takes out the high of the previous trading day at $34.20 then an entry is possible.

Look for TGH's price action to retest minor support or take out the previous day's high. In either scenario, enter as momentum reacts at either level and go long with a trailing stop.

Billy Williams

Billy Williams has been trading the markets for 27 years, specializing in momentum trading with stocks and options.

Company:	StockOptionSystem.com

E-mail address:	stockoptionsystem.com@gmail.com
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