After being a relatively poor performer over the last year, the industrial goods sector is experiencing a resurgence. It has been one of the top performing sectors over the last three months with four stocks doing especially well. Industrial stocks generally perform well during the later stages of an economic decline and during the early stages of recovery. Therefore, with the industrial goods sector being one of the top performers over the last three months, it may be interpreted as a good sign that the economy is recovering. Over the last three months, the SPDR S&P 500 ETF (NYSE:SPY) is up 6.73% to $124.86, from $116.99. Over the same period, the SPDR Industrials ETF (NYSE:XLI) has outperformed - up 10.42% to $33.71, from $30.53. Four large capitalization stocks have been leading the sector higher and still present opportunities.

Rockwell Automation (NYSE:ROK) is up 30.5% in the last three months to $74.62, from $57.18. The chart shows the stock's recent turn-around. It has moved above the 50-day moving average and is currently challenging the 200-day moving average and also a recent high at $76.49. If the price can break above the recent high and also the 200-day moving average, the trade sets up well for a run at $80, followed potentially by $90 - two key resistance levels. Alternatively, a drop back below the 50-day moving average indicates the stock is weakening. (For more, see Moving Averages Introduction.)

Fastenal Company (Nasdaq:FAST) is close behind, up 29.11% to $41.60, from $32.22 just three months ago. The stock is at 52-week-high levels and support is at $38. After creating a recent high, it is possible the stock may pullback in the short-term, as indicated by the currently declining on-balance volume. The stock still remains in a strong long-term uptrend, though, signaling further potential upside toward $46.

Parker Hannifin (NYSE:PH) is up a solid 20.63% in the last three months to $82.11, from $68.07. The stock sold off in July and August but has managed to recover much of the loss. The stock trades very close to the resistance level at $85.84. A rise above $86 would confirm an upside breakout and the potential for the stock to test the 2010 high at $99.40. Ideally, on-balance volume should also break above resistance, but the indicator still remains depressed from the mid-year decline. Support is at $75, and a drop below would signal potential weakness.

Tyco International (NYSE:TYC) has also had a good three-month performance, up 19.3% to $47.48, from $39.80. This stock too saw an an aggressive mid-year decline but has been exhibiting strength recently. Since mid-August, the stock has been moving higher in a choppy fashion, providing ample opportunity to buy pullbacks. The entry point is between $45 and $44, as this is currently where the 50-day moving average intersects, and support is provided by the short-term upward sloping trendline. A relatively tight stop can be used, as a drop back below $43 indicates potential weakness. On the other hand, a rise above $48.50 is likely to bring about a test of the resistance areas at $50.50, $52 and $53.38 (the 2010 high).



The Bottom Line
Industrial stocks often perform well when the economy is in recovery mode, therefore, these stocks can provide a barometer for the broader market. If these stocks continue higher, it is not only positive for those owning these stocks but the market in general. As these stocks recover, they will need to break through resistance and ideally do so with on-balance volume rising. If these stocks decline below support, it indicates weakness and likely weakness for the sector as a whole. (For more, see Technical Analysis: Introduction.)

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

Charts courtesy of stockcharts.com

At the time of writing, Cory Mitchell did not own shares in any of the companies mentioned in this article.

Related Articles
  1. Chart Advisor

    Watch This ETF For Signs Of A Reversal (BCX)

    Trying to determine if the commodity markets are ready for a bounce? Take a look at the analysis of this ETF to find out if now is the time to buy.
  2. Mutual Funds & ETFs

    ETFs Can Be Safe Investments, If Used Correctly

    Learn about how ETFs can be a safe investment option if you know which funds to choose, including the basics of both indexed and leveraged ETFs.
  3. Mutual Funds & ETFs

    The Top 5 Large Cap Core ETFs for 2016 (VUG, SPLV)

    Look out for these five ETFs in 2016, and learn why investors should closely watch how the Federal Reserve moves heading into the new year.
  4. Chart Advisor

    Breakout Opportunity Stocks: CPA, GNRC, WWE

    After a period of contracting volatility, watch for breakouts and bigger moves to come in these stocks.
  5. Economics

    India: Why it Might Pay to Be Bullish Right Now

    Many investors are bullish on India for all the right reasons. Does it present an investing opportunity?
  6. Investing Basics

    Building My Portfolio with BlackRock ETFs and Mutual Funds (ITOT, IXUS)

    Find out how to construct the ideal investment portfolio utilizing BlackRock's tools, resources and its popular low-cost exchange-traded funds (ETFs).
  7. Investing

    3 Things About International Investing and Currency

    As world monetary policy continues to diverge rocking bottom on interest rates while the Fed raises them, expect currencies to continue their bumpy ride.
  8. Chart Advisor

    These 3 ETFs Suggest Commodities Are Headed Lower (COMT,CCX,DBC)

    The charts of these three exchange traded funds suggest that commodities are stuck in a downtrend and it doesn't look like it will reverse any time soon.
  9. Trading Strategies

    4 ETFs To Trade the Russian Ruble (RSX, ERUS)

    Discover which exchange-traded funds (ETFs) provide investors with the greatest exposure to the Russian ruble and learn about the risks that come with each.
  10. Chart Advisor

    3 Charts That Suggest Now Is The Time To Invest In Real Estate (VNQ, SPG,PSA)

    Real estate assets have some of the strongest uptrends around. We'll take a look at three candidates poised for a move higher.
RELATED FAQS
  1. What is Fibonacci retracement, and where do the ratios that are used come from?

    Fibonacci retracement is a very popular tool among technical traders and is based on the key numbers identified by mathematician ... Read Full Answer >>
  2. Should mutual funds be subject to more regulation?

    Mutual funds, when compared to other types of pooled investments such as hedge funds, have very strict regulations. In fact, ... Read Full Answer >>
  3. Do ETFs pay capital gains?

    Exchange-traded funds (ETFs) can generate capital gains that are transferred to shareholders, typically once a year, triggering ... Read Full Answer >>
  4. How do real estate hedge funds work?

    A hedge fund is a type of investment vehicle and business structure that aggregates capital from multiple investors and invests ... Read Full Answer >>
  5. Are Vanguard ETFs commission-free?

    While some Vanguard exchange-traded funds (ETFs) are available commission-free from third-party brokers, a large portion ... Read Full Answer >>
  6. Do Vanguard ETFs require a minimum investment?

    Vanguard completely waives any U.S. dollar minimum amounts to buy its exchange-traded funds (ETFs), and the minimum ETF investment ... Read Full Answer >>
COMPANIES IN THIS ARTICLE
Trading Center