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Trading Industrial and Transportation Stocks

NEW YORK ( TheStreet) -- Since July 30, I have been analyzing sectors and focusing on rotation strategies -- booking profits in overvalued sectors, buying stocks in undervalued sectors, and trading the neutral sectors. Today, I look at "buy and trade" strategies for industrials and transports.

My benchmark ETF, the Industrial Select Sector SPDR Fund (XLI) includes both industrial and transportation stocks. The top 16 components of this 60-stock index include five stocks in the Dow Jones Industrial Average and five in the Dow Jones Transportation Average. Since the Industrial ETF includes some transportation stocks, I will also consider the iShares Dow Jones Transportation Avg (IYT).

Source: Thomson Reuters

The daily chart of the XLI ($36.68), shown above, has an overbought-momentum (12x3x3 daily slow stochastic) reading, with XLI above its 21-day, 50-day and 200-day simple moving averages at $35.58, $35.07 and $35.39, respectively. XLI closed Friday up 10.9% from its June 4 low at $33.08. My semiannual value level lags at $27.72 with a weekly pivot at $36.42 and annual, monthly and quarterly risky levels at $37.74, $38.02 and $42.08, respectively.

Source: Thomson Reuters

The daily chart of the IYT ($90.34), shown above, has a rising-momentum (12x3x3 daily slow stochastic) reading, with IYT below its 21-day, 50-day and 200-day simple moving averages at $90.62, $90.94 and $91.14, respectively. IYT lagged the XLI with a close on Friday up 4.9% from its June 4 low at $86.09. My semiannual value levels lag at $80.77 and $74.80 with weekly, monthly and annual risky levels at $91.74, $95.99 and $97.22, respectively.

The above table shows data from covering the top 16 of the 60 components of the XLI, listed by weighting from top to bottom.

Reading the Table

OV/UN Valued -- The stocks with a red number are undervalued by the percentage shown. Those with a black number are overvalued by that percentage, according to ValuEngine.

VE Rating -- A 1-Engine rating is a strong sell, a 2-Engine rating is a sell, a 3-Engine rating is a hold, a 4-Engine rating is a buy and a 5-Engine rating is a strong buy.
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CAT $71.22 0.00%
FDX $164.09 0.00%
GE $30.36 0.00%
IYT $147.91 0.00%
XLI $55.10 0.00%


Chart of I:DJI
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