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 ValueEngine.com 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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