Founded in 1989, Knight Transportation Inc. is headquartered in Phoenix, Arizona, and operates as a short-to-medium haul truckload carrier, mainly in the United States. The company’s stock climbed to $34.73 in March, 2015, but more than 18 months later, the bulls still have not been able to conquer the $35 mark. Knight Transportation’s shares are currently trading around $28.80, so it is a good time to see if it is time to buy or to be careful.
The Elliott Wave Principle postulates that the direction of the trend can be identified by recognizing a five-wave impulse on the price chart of the instrument in question. In Knight Transportation’s case, we could easily spot the impulsive rally from $1.51 in March, 1995 to $34.73 twenty years later. The guideline of alternation between the two corrective waves within the impulse has also been observed, since wave II is a sharp decline, while wave IV is a sideways triangle retracement. However, no trend lasts forever. Every impulsive sequence is followed by a three-wave correction in the opposite direction. The problem is that the decline to $20.56 in January, 2016, is too shallow. Therefore, we believe Knight Transportation stock still has plenty of room to fall, before the uptrend resumes. Ideally, the support area of wave IV should be the bears’ next stop. This means we should get ready for levels between $15 and $10 a share. So, careful seems better.
