During the 2020 election campaign, President-elect Joe Biden pledged to invest $2 trillion on roads, bridges, clean energy, and other initiatives to advance American competitiveness, create jobs, and curb climate change.
- Stocks involved in constructing roads, bridges, and clean energy should benefit from increased
infrastructure spending under the Biden administration.
- Fluor Corporation (FLR) shares formed a golden cross buy signal in mid-November.
- Nucor Corporation (NUE) shares find support from a well-respected nine-month uptrend line and the 50-day simple moving average (SMA).
This figure may even increase after the Democrats gained control of both chambers of Congress after winning the Georgia runoff Senate election earlier this month, paving the way for even greater infrastructure spending. "Cyclical value stocks will likely benefit from larger stimulus and infastructure-spending plans that will be more likely with full Democratic control of Washington," Hodges Capital portfolio manager Eric Marshall told Reuters.
Below, we take a closer look at two stocks set to cash in on the upcoming infrastructure spending spree. We'll also analyze their charts to identify crucial technical levels to watch.
Fluor Corporation (FLR)
Fluor provides engineering, procurement, construction, and fabrication services to end-market customers in energy, chemicals, mining, metals, and transportation. Last year, the $2.84 billion company landed a government contract for the nationwide deactivation, decommission, and removal of selected nuclear facilities—a trend that is likely to continue under the incoming administration as it pivots toward clean energy solutions. As of Jan. 18, 2021, Fluor stock has traded relatively flat over the past year but has surged nearly 30% year to date.
The company's share price has remained in a steady uptrend since late September, with the 50-day SMA crossing up above the 200-day SMA in mid-November to generate a golden cross buy signal. Active traders should look for retracement entries at the $17.15 level, where price finds a confluence of support from a four-month trendline and the 50-day SMA. In terms of trade management, look to book profits near major overhead resistance at $29.75 while mitigating risk with a stop-loss order placed under the December swing low at $15.52.
A simple moving average (SMA) calculates the average of a selected range of prices, usually closing prices, by the number of periods in that range. Traders often use this indicator to determine the direction of a stock or security.
Nucor Corporation (NUE)
With a market value of $16.75 billion, Nucor produces and sells steel products through three segments: steel mills, steel products, and raw materials. The 63-year-old company may become the Biden administration's steelmaker of choice, given it recently signed a 15-year agreement with EDF Renewables North America that will see it reduce its carbon footprint by utilizing solar energy from 2023 onwards.
Furthermore, Nucor sits well positioned to meet an increase in demand from government infrastructure spending with the construction of a new steel plate mill in Kentucky. Through Friday's close, Nucor stock issues a handy 2.92% dividend yield and is trading 4.29% higher on the year. Over the past 12 months, the shares have gained around 4%.
The steelmaker's share price has trended steadily higher since plunging to its March 2020 pandemic selloff low. Those looking for "buy the dip" opportunities should seek entries near $53.30, where the price finds support from a well-respected nine-month uptrend line and the 50-day SMA. Consider banking profits at either $61.50 or $68.80—both significant resistance levels. Protect capital by cutting losses if the stock closes beneath last month's low at $51.78.
"Buy the dips" refers to entering a stock or security after a retracement in an uptrend. The hope is that the stock will resume its move higher after the pullback.
Disclosure: The author held no positions in the aforementioned securities at the time of publication.