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We heard a discussion recently about what sectors performed the best after the Fed lowered interest rates. It would seem the likely candidates are financials, manufacturing, REITs or utilities, those that have an obvious correlation to rising or declining interest rates.

Interestingly, research suggested it was the industrial gases sector that performed the best following a rate cut. We aren't exactly sure the causality here, but remembering this study and having just gotten a Fed rate cut, we took a look at the group to see if, from a technical standpoint, the argument holds water.

The stocks in this sector look very interesting and promising from a technical standpoint, but there aren't a whole lot of ways to play this due to recent consolidations. This has left the sector with really only three major domestic players in the specialty-gases space:

Air Products

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These companies are involved with everything from standard gases such as nitrogen and hydrogen to more complex products used in the manufacturing of steel and concrete. The basic manufacturing process has not changed much, but what is changing are the uses for these products.

New uses are creating growth for these companies' products. Plus, this business has all the right buzzwords. It's about basic materials and industrial growth, and with the infrastructure build going on in emerging markets, demand for these products should stay high and continue to support the development of new uses. One risk is the potential for higher raw-material costs impacting profitability, something to keep in mind as commodity prices continue to rise.

The technical structure of two major players in this space is positive and suggestive of further strength. Airgas suffered a nasty decline, just like most stocks during the recent market weakness. This weakness, however disconcerting at the time, did not result in any damage or change to the long-term bullish uptrend. The stock remains in a multiyear rally that continues to display characteristics suggesting there are higher prices still to come.

The volume has been supportive of accumulation as well, with increases in volume predominantly occurring during rally days. We would anticipate further strength to the mid- to upper $50s. In order to maintain the positive configuration we have defined, the stock needs to hold above the recent lows in the $42-$44 area.

Air Products has many of the same bullish characteristics as Airgas. It is also in a long-term multiyear advance and continues to show further upside momentum. The stock recently emerged from a bullish consolidation that suggests further strength to the low $100s. Key support is found in the $85-$88 range, and we would like to see that level hold in order for the stock to maintain its bullish configuration.

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.