Market Overview

2 Transportation ETFs Break Out

2 Transportation ETFs Break Out

Falling oil prices have helped boost the transportation industry. With WTI crude trading at its lowest level since January and Brent crude hitting a 16-month low, it has helped lower the expenses for many transportation-related businesses.

The Dow Jones Transportation Index broke out to a new all-time high this week. The index of 20 stocks includes companies in the trucking, railroad, shipping, and airline sectors. Year to date the sector is up 15 percent, easily outpacing the overall stock market.

Investors looking to take advantage of the continued rise in the transportation sector have a few ETF options. Below are two that have benefited from the recent success of the transportation industry and fall in crude oil prices.

Related Link: Tensions & Airlines Boost ETFs (ITA, PPA, BA, LMT)

iShares Dow Jones Transport. Ave. (ETF) (NYSE: IYT)

IYT tracks the index mentioned above and year to date is in line with it, gaining slightly more than 15 percent.

The most heavily weighted sectors are the railroads at 24 percent and delivery services at 21 percent. The top individual holdings in the fund are FedEx Corporation (NYSE: FDX) at 9.8 percent, Kirby Corporation (NYSE: KEX) at eight percent and Kansas City Southern (NYSE: KSU) at 7.7 percent.

From a technical perspective IYT has created a very bullish pattern on the chart over the last two months, displaying what is known as a "cup and handle." The cup and handle pattern has become famous through the Investors Business Daily and has been relatively reliable in generating buy signals.

The pattern is formed when an ETF pulls back from a recent high and forms what looks like a “U” shape or “cup.” The handle on the right hand side is a consolidation on low volume that is followed by a breakout to a new high on above average volume. IYT broke out this week and triggered a buy signal.

SPDR S&P Transportation ETF (NYSE: XTN)

XTN seeks to provide results that are characteristic of the S&P Transportation Select Industry Index. It consists of 47 stocks that cover six niche transportation sectors. The ETF is diverse, with 35 of the holdings making up between two and three percent.

Its top individual holdings include Southwest Airlines Co (NYSE: LUV) 2.9 percent, JetBlue Airways Corporation (NASDAQ: JBLU) 2.9 percent and Avis Budget Group Inc. (NASDAQ: CAR) 2.8 percent.

The ETF has outperformed IYT year to date with a gain of 19 percent. XTN displays a similar chart to IYT in regards to

The demand for rail and trucking to transport goods around the country, combined with falling energy prices, makes the transportation stocks an attractive investment heading into the end of the year. Add in the bullish charts and it appears the two ETFs are set to continue outperforming the market.


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