Value stocks continue to exhibit stellar performance, as infrastructure stocks (materials and industrials) are bought by institutions. Most of these candidates have ripped higher. As a result, large swaths of value stocks are being bought with profits from growth stocks, like AAPL, AMZN, PCLN, MSFT, FB, GOOGL and NFLX. These technology names have moved lower as a result, pushing the IGX IVX ratio downward in the process.
Number one rated and IBD50 component Eagle Materials (EXP), jumped 14.85% in the two days following the election. VMC, CAT, MLM and FLR catapulted higher as well. Fluor is in the heavy construction industry group, lagging most of these candidates. FLR might break out of its current pattern in the coming weeks, as it plays catch up with its competitors.
The industrials sector bolted higher as a result of this optimism. As we transition into an infrastructure fueled economy, it is prudent to anticipate prices will succumb to exhaustion at some point, so there is no need to chase these stocks higher. Wait for a base or pattern, as impatience can cost you money.
That said, note the 3 week period following Brexit (June). Industrials continued higher.
Scaling into positions is the smart thing to do, while anticipating institutions could continue buying over the coming weeks. Its equally possible price action could back and fill, giving us an opportunity to add to or start new positions.
This change will rollout over the weeks and months to come, so we have time on our side. Additionally, industrials are not the only sector that will benefit from changes in policy. We have opportunities in biotech, healthcare, transportation, materials and consumer discretionary too.
In summary, we need to do our homework over the weekend. There are many candidates that institutions have yet to buy, leaving us with opportunities. Analyze the stocks in the Industrials Sector. We will do the same this weekend and report back to you on Sunday.
Happy Trading – CV
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