Over the last week, the Basic Materials sector has been the market leader, as a group up 3.1% according to Finviz. The Financial and Industrial Goods sectors are following suit, up 2.6% and 2.4% respectively. The sector has also been one of the top performers over the last month, partially due to the strong performance of four of its North American large caps, all up more than 14%. Here's the technical outlook for these four hot stocks.
SEE: Shifting Focus To Sector Allocation
Goldcorp (NYSE:GG) up 21.5% on the month and 9.8% for the week. The July rally is the biggest one seen since the stock had its last big upside move in July through September of 2012. The trend is still down for this stock, but there is a potential turnaround play. If the stock can push above $30.95, the May high, it will create a higher high and put the downtrend in jeopardy. Before entering long though I'd like to also see the stock pullback and stay above the June low at $22.22. Waiting for that that trade to develop, if it does, will take some patience. Another option is to watch the price as it nears the $30.95 level. The short-trade is appealing if there is a failed break or if the stock doesn't break that level and then starts to slide back lower. Place a stop loss order just above $31 (or the most recent high), with downside targets at $27.75, $25 and $21.50 if the price keeps falling through the prior targets.
Canadian Natural Resources (NYSE:CNQ) is up 18.2% for the month, and 4.5% over the last week. The stock recently broke above the March $33.21 high, and this is following a higher-low in June relative to the November 2012 low. So it is possible this stock is beginning an uptrend. Unfortunately though, the stock has traded within a huge narrowing range since 2008, making a trend direction hard to pinpoint over the long-term. Short-term I like the long trade if the stock pulls back toward $32, but holds above $31.25--because that is where I'd place the stop. Target just under $35. If the price falls below $31.25, I prefer the short-trade, relying on the long-term range to continue with the price likely continuing to fall in the $29 to $28 region.
SEE: Introduction To Technical Analysis Price Patterns
Shlumberger (NYSE:SLB) is up 14.8% over the last month and 9.2% over the last week. The price surge has resulted in the stock breaking out of a trading range which is has been in place since late 2011. This is a bullish sign, but there could be some turbulence as traders and investors get shaken on both sides of this trade. If the stock drops below $81, I'd expect it to continue falling into the $78 to $77 range. That's the potential short-trade. The long-trades may require more patience. If the stock pulls back toward $81 and then starts moving higher again, I like the long, with a target near $86.50. If the stock falls through $81 I'd be looking to pick it up anywhere above $77 on a pullback, but only once it starts to move back higher.
Hess (NYSE:HES) is up 14.7% over the last month and 3.8% for the week. That brings the stock very close to an upside breakout. In April Hess reached $74.48, and on July 22 the stock hit $74.50, but was unable to hold the level and slid down. Another push above $74.50, especially a daily closing price, will likely solidify the breakout and offer a long-term target near $85. On the other hand, if the stock drops back below $71, the range will likely continue and therefore I like the short-trade with a target near $67 to $66.
SEE: Target Prices: The Key To Sound Investing
The Bottom Line
I like trading the most active stocks within the most active sectors. Just because these four basic materials stocks have had a good run recently doesn't mean you should jump right in though. Being patient after a strong run-up, and waiting for a pullback or confirmation of a another bullish move, is the prudent choice. Approach each trade with a plan for how to get in, control risk and takes profits.
At the time of writing, Cory Mitchell did not own shares in any of the companies mentioned in this article.
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