Over the last few months, the industrial sector has been one of the strongest performers, along with financials. Within the industrial sector, heavy construction stocks have been leading the charge higher. All three of the stocks discussed below have jumped more than 15% in the last month. Here’s where they are now, where they could be going, and technical levels to watch for.
Aecom Technology Corp. (ACM) exploded higher after the U.S. election, closing at $27.87 on Nov. 8 and hitting as high as $37.97 on Nov. 15. That’s a 36% jump in five trading sessions. The advance has stalled since Nov. 15, with the price trading in a range between $37.97 and $36.44 as of Nov. 22. Momentum traders will be looking for a rally above the recent high, and a continuation to the upside. A three-year chart reveals some potential trouble for the stock, though. The three-year high is $38.24, established in 2014. Over the last few years, the stock has struggled to stay above $35 for long. A short-term drop below $36.44, and especially $36, could signal the upside breakout was false, with the expectation being that it will drop back to support at $30.
Chicago Bridge & Iron Co. (CBI) bottomed at $26.12 in September and was already starting to rally, but it too got a big boost after the U.S. election, closing at $33.98 on Nov. 22. The stock has rallied 30% since the September low. For those that are bullish, the stock is in a “no man’s land” right now, having broken out above minor resistance at $32 on Nov. 21 and 22. Waiting for another pullback into the $31 to $30 area may prove to be a better risk/reward trade than buying at current levels. That’s because the stock is still in an overall downtrend, despite the recent strength. $34 to $35 is a potential resistance area based on a number of descending trendlines which extend back to mid-2015. If the price slows down in that region and then experiences some weakness, bears will be looking to hop in a short trade and ride the price down to support near $30 (or potentially lower based on the long-term downtrend). This rally would need to extend up to the $40 region to indicate the potential for a long-term trend change.
Jacobs Engineering Group Inc. (JEC) has been trending higher since it bottomed in February. The uptrend accelerated after the U.S. election; the stock closed at $49.99 on Nov. 8 and finished the day at $59.32 on Nov. 22. There is minor resistance near the $59.30 region, so momentum traders will be watching for a continued rally above that level. In the short-term, that could push the price to $62, and $69 over the longer-term. (based on the strength of prior waves in the uptrend). Buying at the current levels can be tricky, though, since a pullback will come at some point, and that pullback will likely trigger all the stop loss orders below the Nov. 22 intraday low of $57.27. The more patient play is to wait for a pullback toward support between $53 to $52. Traders can then look to participate in the uptrend, with a stop loss below more substantial support at $49.
The Bottom Line
Momentum traders are watching these heavy construction stocks closely. Strong upside movement could continue in the short-term if the stocks move through resistance levels, which will trigger addition buying interest. Aecom Technology and Chicago Bridge have some potential bearish signals, though, so if the price starts to decline that could also attract bearish momentum traders looking to capitalize on drops toward support. Jacobs is in a strong uptrend and potentially has more room to run higher, but longer-term traders may be able to pick the stock up at a better price on the next major pullback.
Disclosure: The author doesn’t have positions in the stocks mentioned.
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