XPO Logistics Looks Set For New Highs

 | Aug 31, 2017 | 10:20 AM EDT
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In our last update on XPO Logistics, Inc. (XPO) in early March, we said, "If prices pull back, we should expect to see support or buying interest at $49 and $48. A rally to a new high of $55 would be an upside breakout and give us a possible price target of $83...."

As it turned out prices dipped to the $45 level in March and April and then rallied above $55 in early June. Prices continued to rise to around $65 and have pulled back to the breakout point around $55.

This is classic chart work as the resistance at $55 is broken and we see a subsequent pullback to the breakout where roles reverse and resistance becomes support. XPO has rallied in the past two weeks and just closed above the 50-day moving average line. Let's check out the charts and indicators before XPO rallies to a new 52-week high.

In this daily bar chart of XPO, below, we can see a "stair-step" rally the past twelve months with higher highs and higher lows all along the way. The smoothly rising 200-day moving average has clearly defined the uptrend. XPO just closed above the 50-day moving average line which currently has a slight downtrend. Further strength in XPO should quickly turn the slope positive again. The daily On-Balance-Volume (OBV) line rises from November to early July to confirm the advance with signs of aggressive buying. The OBV line is flat the past six weeks and a new high on the OBV line would be a good sign in the next few days. In the lower panel of the chart is the Moving Average Convergence Divergence (MACD) oscillator which crossed the upside last week signaling a cover shorts buy signal.

In this weekly chart of XPO, below, we can see the base pattern made in 2016 and the subsequent rally. Prices are above the rising 40-week moving average line and all declines towards the 40-week line have been buying opportunities since late 2016. The weekly OBV line has been bullish and rising since June of 2016. The OBV line did correct with prices in July, but it looks like it has turned back up again. The weekly MACD oscillator has been above the zero line for the past twelve months but recently crossed to a take profits sell signal (a sell signal when the oscillator is in bullish territory - above the zero line).

In this Point and Figure chart of XPO, below, we can see the positive improvement in the chart with the rally to $61.03. A bullish upside price target of $72.14 is projected.

Bottom line -- XPO could trade sideways for a few days, but right now it looks like it will retest and break its late June/early July high around $65. I would trade XPO from the long side risking a close below $55 and looking for gains to $72 as our first upside price target.

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