Companies that make up the industrials sector are those that specialize in converting unfinished goods into products that are then in turn used to manufacture other goods or services. As the nature of the businesses implies, the group can tend to act as a good gauge of overall economic conditions.
As we'll discuss in this article, this niche group of companies seems to be set to outperform over the weeks and months ahead. We'll try to determine how followers of technical analysis will be positioning themselves to profit from the move.
Vanguard Industrials Index Fund ETF (VIS)
Traders who want to get a sense of where a broad sector such as industrials is headed will often turn to popular exchange-traded funds such as the Vanguard Industrials Index Fund ETF (VIS) for clues. With over 353 holdings and an expense ratio of 0.10%, the fund one of the most popular targeted funds in the market used to track this specific segment. As you can see from the chart, the price has been trading within a defined range for most of 2019, which will be of specific interest to followers of technical analysis because of how the price has respected major support and resistance levels. Past behavior near these pivot points will likely increase the likelihood that these levels are used again for determining the placement of buy and stop orders.
More specifically, notice how the dotted trendlines and the 200-day moving average have propped up the price on attempted pullbacks. Now that the price has risen above, traders will likely look to the upper trendlines and the related bounce as a signal of a move higher from here. From a risk management perspective, stop-loss orders will most likely be placed below $150, the 200-day moving average ($143.13), or the lower trendline near $140, depending on risk tolerance and investment horizon.
The Boeing Company (BA)
It has been little secret that The Boeing Company (BA) has faced its fair share of challenges in 2019. However, with that said, taking a look at the chart below, you'll notice that the price is trading between two influential trendlines that will likely be used to guide the placement of buy and stop orders over the coming weeks and months. Now that the price has managed to notch several closes above the 200-day moving average, bullish traders will most likely want to keep an eye out for a move above the upper trendline near $383. A close above the trendline would likely bring targets toward the 2019 high and then likely even higher from there.
Honeywell International Inc. (HON)
With a market capitalization of more than $126 billion, Honeywell International Inc. (HON) is another well-known industrial company that is a favorite of many active traders due to its strongly defined trends. As you can see from the chart below, the 200-day moving average has acted as a strong level of support on attempted pullbacks over the course of 2019. Active traders would expect this behavior to continue and will most likely look to place their buy orders as close to the combined support near $165.47 as possible.
The Bottom Line
The industrials sector is often overlooked in favor of the companies and sectors that focus on finished goods and services. However, based on the charts discussed above, this niche sector looks poised to continue the strong upward trend. Traders will most likely look to add to their long positions as close to the long-term levels of support as possible and then set their target prices near the 2019 highs or perhaps even beyond.
At the time of writing, Casey Murphy did not own a position in any of the assets mentioned.