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.

Charts courtesy of StockCharts.com

Related Articles
  1. Markets

    Relative Valuation Of Stocks Can Be A Trap

    This method of valuing a company can make it look like a bargain when it is not.
  2. Active Trading Fundamentals

    How Market Psychology Drives Technical Indicators

    The tenets of market psychology underlie each and every charting tool.
  3. Bonds & Fixed Income

    Equity Valuation In Good Times And Bad

    Learn how to filter out the noise of the market place in order to find a solid way of determing a company's value.
  4. Options & Futures

    Trading Psychology: Consensus Indicators - Part 2

    Professional market players are some of the best models for the individual small trader to mimic.
  5. Active Trading

    World's Wackiest Stock Indicators

    Can butter production help you predict the market's next move? Find out here.
  6. Active Trading Fundamentals

    Leading Indicators Of Behavioral Finance

    Discover how put-call ratios and moving averages can be used to analyze investor behavior.
  7. Trading Strategies

    Who Actually Trades or Invests In Penny Stocks?

    Although penny stocks are highly speculative, millions of people trade them daily. Here are 10 different types who do.
  8. Chart Advisor

    4 Stocks Still Flashing Buy Signals

    In the midst of volatility and a big market sell-off last week, these stocks are flashing buy signals.
  9. Technical Indicators

    Understanding Trend Analysis

    Trend analysis is the use of past performance to predict future price movement of a security.
  10. Trading Strategies

    How To Buy Penny Stocks (While Avoiding Scammers)

    Penny stocks are risky business. If want to trade in them, here's how to preserve your trading capital and even score the occasional winner.
  1. Fintech

    Fintech is a portmanteau of financial technology that describes ...
  2. Indicator

    Indicators are statistics used to measure current conditions ...
  3. Intraday Momentum Index (IMI)

    A technical indicator that combines aspects of candlestick analysis ...
  4. Mass Index

    A form of technical analysis that looks at the range between ...
  5. Money Flow Index - MFI

    A momentum indicator that uses a stock’s price and volume to ...
  6. On-Balance Volume (OBV)

    A momentum indicator that uses volume flow to predict changes ...
  1. What assumptions are made when conducting a t-test?

    The common assumptions made when doing a t-test include those regarding the scale of measurement, random sampling, normality ... Read Full Answer >>
  2. How are double exponential moving averages applied in technical analysis?

    Double exponential moving averages (DEMAS) are commonly used in technical analysis like any other moving average indicator ... Read Full Answer >>
  3. How do you know where on the oscillator you should make a purchase or sale?

    Common oscillator readings to consider making a buy or sale are below 20 or above 80, respectively. More aggressive investors ... Read Full Answer >>
  4. What are the alert zones in a Fibonacci retracement?

    The most commonly used Fibonacci retracement alert levels are at 38.2% and 61.8%. A 50% retracement level is also commonly ... Read Full Answer >>
  5. How was the Fibonacci retracement developed for use in finance?

    The use of Fibonacci retracements in stock trading was popularized by noted technical analysts W.D. Gann and R.N. Elliott. ... Read Full Answer >>
  6. How reliable is the Fibonacci retracement in predicting stock behavior?

    The use of the Fibonacci retracement is subjective. There is no objective method to verify one application of the Fibonacci ... Read Full Answer >>

You May Also Like

Trading Center

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!