The best-performing sectors of the year have been those associated with the ever-expanding worldwide infrastructure buildout. These are the raw materials, commodity stocks and industrial cyclicals that provide the machinery to pull those materials out of the ground, then process, transport or turn these materials into something else.

These stocks are holding a similar leadership role in this market to that of the technology stocks in the late '90s. They defy common wisdom. Their moves are extended, yet they continue to advance.

There is perhaps no more a basic material when it comes to infrastructure buildout than steel. These stocks are in strong uptrends, continue to advance and look to be headed higher.

As is the case for most commodity stocks, it is not early in the advance. This poses a greater challenge with these issues, since there is increased risk when purchasing stocks that are well along in their advance. The reward still outweighs the risk at this point, and we believe the steel stocks will continue to advance, but keep in mind we are profiling them as aggressive long ideas at current levels.

Steel stocks have been consolidating their gains over the last six weeks. This is healthy and constructive price action. It is not surprising to see issues consolidate and digest gains after a strong advance, providing a period in which buyers step aside in hopes of getting better prices, but there is also little selling. The stocks do not pull back much, because the buyers attempt to buy the pullback, lifting the price. The volume is typically light during these periods, which is further evidence of the lack of selling pressure.

Two names in the steel sector that look attractive at these levels are

AK Steel

(AKS) - Get Report

and

Carpenter Technology

(CRS) - Get Report

.

AK Steel is a producer of flat-rolled steel used in everything from automobiles to steel tubing. It has been forming a bullish consolidation since the beginning of May. It suggests that the stock is ready to resume the primary uptrend soon. Look for a breakout over $36 to confirm the pattern and show that the bulls are reasserting the uptrend. A break of the uptrend line at $30.50 would take the stock off of the offensive, and a stop loss should be used at that level.

Carpenter Technology

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Carpenter Technology is another company in the steel sector that specializes in alloys, such as stainless steel. These alloys are used in a broad range of industrial applications, such as aerospace and automotive.

CRS broke out to the upside of a large consolidation formation in May. The stock consolidated and formed a basing pattern over the last year. After the breakout, it has worked its way higher and continues to hold a steady uptrend line. The bulls are in control, and the uptrend should continue higher in the coming weeks. A break of the uptrend line at $127 would signal a bearish change in the chart, and we would use this level as a stop loss.

At the time of publication, John Hughes and Scott Maragioglio had no positions in the stocks mentioned. Hughes and Maragioglio co-founded Epiphany Equity Research, which has developed and utilizes proprietary tools to identify and track liquidity changes in the market indices and sectors. Hughes advises numerous asset managers, hedge funds and institutions managing in excess of $30 billion. Maragioglio is a member of the market technicians association (MTA) as well as The American Association of Professional Technical Analysts (AAPTA) and holds a Chartered Market Technician (CMT) designation. Maragioglio has also served on the board of directors of the AAPTA.