Posted on February 16, 2020
A guy I knew in high school told me a story about a prank some older fellas pulled on him one day after football practice.
Seems the seniors had a bit of a mean streak and decided to place a large wad of bubble gum in the youngster’s briefs.
Needless to say, our acquaintance noticed nothing on returning from his post-practice shower, donned his BVDs in a jif and headed home.
Trouble was, he said, about five minutes into his walk he began to feel a tugging down below, slowing him down and exerting a varying itchy/sticky sensation where none ought be found.
We won’t trouble you with all the gory details (involving a can of WD-40 and a pair of his mother’s pinking shears), except to say that the real world analog to this equally true story is now taking place in the transport sector, where a vicious and fast-spreading disease is wreaking havoc on commerce both domestic and foreign and all but crippling those who deliver the goods.
Today’s trade is a play on trucking behemoth J.B. Hunt Transport Services (NASDAQ:JBHT), proud member of the Dow Transportation Index and very likely on her way to a near term loss.
But before we show you the charts, consider the following –
Beyond that, the overall environment for the truckers doesn’t look healthy.
See here –
According to the latest Transportation Services Index numbers (upper chart), we have a steepening decline across the board, in trucking, rail, inland waterway, pipeline and air freight, while…
Truck tonnage numbers show declining shipments and a greater number of less-than-capacity loads going out.
Now look at J.B. Hunt’s chart for the last six months –
According to our read, the stock could be on the verge of a steep break lower.
That said, the Head and Shoulders top could take a while to play out, so we’re playing it safe, with the sale of a CALL spread and the purchase of a PUT spread.
Like this –
A Jew and His Money recommends you sell the JBHT May 15th 110 CALL for $5.50 and buy the JBHT May 15th 120 CALL for $1.95 (credit $3.55). Then purchase the JBHT May 15th 110 PUT for $5.50 and sell the JBHT May 15th 100 PUT for $1.80 (debit $3.70). Total debit on the trade is $0.15.
Maximum gain on the trade is $9.85
Maximum loss is $10.15.
With kind regards,
Hugh L. O’Haynew