Keep on truckin’

Scanning options activity can be a good way to spot potentially interesting market action—even if the data takes you in a direction you didn’t initially suspect.

When trucking transportation and logistics company Knight-Swift Transportation (KNX) popped up yesterday on LiveAction scans of unusual call options volume and high call/put ratios (below), it made sense to check out what was going on.

Highest Call to Put Ratios, 3/13/18

Source: OptionsHouse

It turns out a lot of March 50 calls changed hands, but with those options expiring in three days and the stock already trading between $49.50-$49.90 (up around 1%) for much of the trading session, it didn’t seem like that activity had implications beyond this week’s expiration. Any reason to think bullishly beyond that?

A look at a KNX chart (below) shows yesterday’s rally had pushed the stock above its February highs and left it with only blue sky between here and its January 31 record high of $51.94. The nearly 10% intraday jump that occurred that day just happened to follow the company’s Q4 numbers release, which showed KNX topped earnings estimates by around 20% (52 cents vs 41 cents). The stock retraced some of its steps over the next few sessions—filling the up gap on February 6 as the broad market correction took hold—and then consolidated over the next few weeks before its recent upthrust. But it never broke sharply.

Knight-Swift Transportation (KNX), 10/19/17–3/13/18

Source: OptionsHouse

Knight-Swift is the result of a merger between Knight Transportation and Swift Transportation last year that created a $5 billion trucking powerhouse that counts Walmart (WMT) among its clients.1 Knight stock, which had been drifting lower in early 2017, jumped on the merger news last April and has rallied 78% or so since then.

Nine of 15 firms covering the stock rate it as a “strong buy” (with one “buy” and four “hold” ratings), and the average analyst 12-month price target is $58 (with a range from $46 to $60).2 Even before earnings were released, Deutsche Bank had raised its price target from $50 to $55.3

Overall, industrial transportation stocks have been doing quite well recently—the S&P Road & Rail sub-sector was up more than 4% over the past week as of yesterday—and along with the rest of the industry, KNX has benefited from continued strength in US economic activity.

As a final aside, KNX stayed firmly in positive territory when the news broke yesterday that Secretary of State Rex Tillerson had been fired, while the S&P 500 slipped into the red after the announcement.

CBOE Global Markets (CBOE), 1/8/18–3/13/18

Source: LiveAction scan, OptionsHouse by E*TRADE

Market Mover Update: After following through on its push above its February high, CBOE Global Markets (CBOE) had rallied around 5% (to $124.55) as of Friday before taking a breather the past couple of days (above). The upswing brought the stock close to the bottom of the February 5-6 down gap; the top of the gap is just above $130.

Inflation Watch: For now, inflation watchers will just have to keep watching, as yesterday’s February Consumer Price Index (CPI) number failed to show any of the upward price pressures that were present in the January reading. The CPI increased 0.2% M/M (2.2% Y/Y), in line with expectations.


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1 Forbes. Knight, Swift Transportation Merge To Create $5 Billion Trucking Giant. 4/10/17.

2 Knight Transportation, Inc. Stock Research - Analyst Summary. 3/13/18.

3 Knight Transportation (KNX) PT Raised to $55 at Deutsche Bank Following Investor Meetings with CEO; 'Demand Drivers Firing on All Cylinders.’ 1/18/18.