Small-cap, retail, and transportation stocks have rocketed higher in recent weeks, but it isn't wise to chase these overextended groups, because profit-taking could start at any time. So what overlooked sectors might catch fire next, as cash comes out of those winners and searches for a comfortable new home?

I nominate the mid-cap utility stocks. These issues are outperforming their large-cap brethren, with many trading above their 50-day moving averages, even though the Dow Jones Utility Average (UTIL) is stuck below that level after the five-week recovery. This superior performance could presage a notable rotation, with cash returning to the sector for the first time in 2010.

Dow Jones Utility Average -- Daily
eSignal

The UTIL index broke down from a massive topping pattern in September 2008 and plunged to a four-year low. It bottomed at 288 in March 2009 and bounced up to a 52-week high at 408 last December. The index then rolled over with the broad market, violating the 50- and 200-day moving averages.

Price has now rallied back to the intersection of these resistance lines but is showing no signs that it's getting ready to break out and test last year's high. However, mid-cap buying activity offers a more bullish view, with the likelihood that this index and the entire group will head higher in the next few months.

EQT Corp. (EQT) -- Daily
eSignal

EQT ( EQT) is an integrated energy company serving Pennsylvania and the Appalachian region. It bottomed out in October 2008 and entered a steady uptrend that's still in force. The stock rallied to $46.80 in October of last year and pulled back in a bowl-shaped correction. It finally returned to the high last week and broke out.

Accumulation on this sector leader has been steady, but recent volume action doesn't support a quick burst to higher ground. Instead, look for the stock to enter a period of sideways consolidation between $45 and $47. In turn, that would improve the underlying technicals and set the stage for a rally into the low $50s.

Wisconsin Energy (WEC) -- Daily
eSignal

Wisconsin Energy ( WEC) posted major highs near $50 in 2007 and sold off with the broad market. It bottomed out in the mid-$30s and returned to those highs in December of last year. Resistance kicked in, right on schedule, dropping price into a six-week downturn. The stock bounced at $46.88 and has now pulled within a point of the breakout level.

This is a bullish transitional pattern that should eventually yield a major breakout and rally to new all-time highs. That would be quite an achievement in a sector that has been underperforming the broad market since the March 2009 low. For now, interested buyers can build early positions or wait until price trades up and over $50.89.

Calpine (CPN) -- Weekly
eSignal

Calpine ( CPN) tells an interesting tale on its weekly chart. The Texas-based natural gas and geothermal energy company got slammed in the bear market, dropping from $23 to $5 in nine months, and then bouncing up to the 50% selloff retracement in June of last year. The stock then went dead as a doornail, dropping into a triangle pattern that's still in place.

Price has been ticking higher in the last two weeks, after multiple upgrades, and looks ready to finally break out and resume its uptrend. The logical target for the next rally lies at $23, because that level would mount the "other half" of the selloff retracement. An early-entry strategy should work well with this narrow pattern, because a stop loss can be placed under the five-week low near $10.50.

Natural Fuel Gas (NFG) -- Daily
eSignal

National Fuel Gas ( NFG) is a natural gas energy provider operating in New York and Pennsylvania. It has held up remarkably well, considering the recent plunge in natural gas futures. The stock doubled in price after bottoming out $26 in March 2009 and rolled over in December, dropping into the mid-$40s.

It bounced off that level last month and has now rallied back to the three-month high. Accumulation is lagging price action, suggesting further consolidation, prior to a notable breakout. That might take another two to three weeks. Once the move is under way, the renewed uptrend could carry all the way to the 2008 high at $63.

Alan Farley provides daily stock picks and commentary with his "Daily Swing Trade" newsletter.

At the time of publication, Farley had no positions in stocks mentioned, although holdings can change at any time.

Alan Farley is a private trader and publisher of Hard Right Edge, a comprehensive resource for trader education, technical analysis, and short-term trading techniques. He is also the author of The Daily Swing Trade, a premium product from TheStreet.com that outlines his charts and analysis. Farley has also been featured in Barron's, SmartMoney, Tech Week, Active Trader, MoneyCentral, Technical Investor, Bridge Trader and Online Investor. He has written two books: The Master Swing Trader and The Master Swing Trader Toolkit: The Market Survival Guide, due out in April. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks.

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