The industrial goods sector comprises companies that produce or sell machinery, equipment, or supplies used in construction or manufacturing. As economies around the world continue with various phases of relaunch, this sector could be poised for strong surges in underlying demand. In this article, we look at several charts from across the industrial goods sector and try to determine how followers of technical analysis will be looking to position themselves over the days and weeks ahead.
iShares U.S. Industrials ETF (IYJ)
Active traders who are interested in niche market segments such as industrial goods often turn to exchange-traded products such as the iShares U.S. Industrials ETF (IYJ). As you can see in the chart below, the price of the fund has been able to move above the 200-day moving average, and the recent uptick in buying pressure has triggered a bullish crossover between the 50-day and 200-day moving averages.
The recent close above the horizontal trendline suggests that the bulls are in clear control of the momentum and that prices could be headed higher over the weeks ahead. Depending on risk tolerance, many traders will likely maintain a bias to the upside and protect against a selloff by placing stop-loss orders below $159.18 or $152.93.
Union Pacific Corporation (UNP)
As one of the top holdings of the IYJ ETF, Union Pacific Corporation (UNP) will most likely be of specific interest to active traders. As you can see from the chart below, the price has recently broke beyond the resistance of a key horizontal trendline. Recent price action near this trendline suggests that the bulls are in control of the momentum and that prices are well poised to make a move higher.
Traders will also want to note how the price of the stock was able to find support near its 200-day moving average earlier in the summer. Price action near the long-term moving averages suggests that these levels will be relied on for determining the placement of buy and stop orders.
Honeywell International Inc. (HON)
As another top holding of the IYJ ETF and newest member to the Dow Jones Industrial Average, Honeywell International Inc. (HON) seems well positioned to move higher over the coming weeks. As you can see from the chart below, the stock is near several major levels of support.
The bounce from the 200-day moving average and close above the horizontal trendline on above-average volume suggest that the bulls are in control of the momentum. Stop losses will most likely be placed below the one of the trendlines or the moving averages, depending on risk tolerance.
The Bottom Line
The industrial goods sector is often overlooked in favor of other market segments. Based on the chart patterns discussed above, it seems as though current levels are presenting lucrative risk/reward setups for followers of technical analysis and that a move higher could be fueled by strong economic demand.
At the time of writing, Casey Murphy did not own a position in any of the assets mentioned.