Do Basic Materials Have Market Mojo? DOW, DD, NEM

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Things have been rough for them lately, but how are basic materials stocks looking these days?

Do Basic Materials Have Market Mojo?: DOW, DD, NEM

Source: ©iStock.com/TomasSereda

The iShares Dow Jones U.S. Basic Materials ETF (IYM) has performed well against the broader equity benchmark, the SPDR S&P 500 ETF Trust (SPY), up 7.3% and 0.8% year-to-date, respectively.

Today, we’ll use Profit Scanner to look at some of the larger components of the IYM in an effort to determine the level of correlation and investment opportunity — and perhaps gain additional insight into the overall direction of the industry in the process.

Here are the three basic materials stocks we’re taking a look at.

Basic Materials Stocks on the Radar: Dow Chemical Co (DOW)

Basic Materials Stocks on the Radar: Dow Chemical Co (DOW)Dow Chemical Co (DOW) drives innovations that extract value from the intersection of chemical, physical and biological sciences to help address many of the world’s most challenging problems such as the need for clean water, clean energy generation and increasing agricultural productivity. With a market cap of $57 billion, the company holds the largest weighting in the IYM index at 10.8% of assets.

In the intermediate-term chart above, you’ll notice a very range-bound stock struggling to find direction at the current time. This is actually a healthy sign, as shares have experienced a sizable run since the early 2009 market lows, back when investors could have shelled out about $6 per share to buy into the company.

Profit Scanner hints that the stock is still bullish. But with overhead resistance within striking distance at $53.38, bearish forces could come into play in an effort to keep the stock within range. With the stock trading around $51.63 per share, there is little upside room for profit — +3.38% to be exact.

Basic Materials Stocks on the Radar: E I Du Pont De Nemours and Co (DD)

Basic Materials Stocks on the Radar: E I Du Pont De Nemours and Co (DD)E I DU PONT DE NEMOURS and Co (DD) provides essential, but practical, solutions for its customers — from products that contribute to protecting the lives of soldiers and law-enforcement officers, to solar technology harnessing the natural power of the sun, to helping farmers yield healthier crops. The company holds the second-largest weighting in the IYM index at 10.6%.

Du Pont stock had been bullish throughout much of March, until the tail end of the month when a technical event spotted by Profit Scanner, known as an “Inside Bar,” threatened to derail the positive trend. The signal suggested that the balance between buyers and sellers was beginning to even out, with a weakening in conviction by the bulls and an increase of influence in trend by the bears. And that alone held shares of DD in check over the next several weeks.

But bearish price pressure couldn’t be sustained, and Profit Scanner alerted investors to a positive development referred to as the “Triple Moving Average Crossover,” which is a bullish signal generated when a faster moving average (four bar) crosses above an intermediate moving average (nine bar), which in turn crosses above a slower moving average (18 bar). In this state, the price is likely in an established uptrend.

And that’s all it took to help push DD up past $65. However, the stock’s upward trend appears to be weakening once again as equity markets smack up against historically respected price levels, rolling over and dragging Du Pont down with them in the process.

But, with no Profit Scanner trading signals since April 1, one begins to get the sense that this stock is most likely dead money for a while.

That said, let’s see what’s behind door number three…

Basic Materials Stocks on the Radar: Newmont Mining Corp (NEM)

Basic Materials Stocks on the Radar: Newmont Mining Corp (NEM)Newmont Mining Corp (NEM) rounds out the lower tier in the IYM index at 3.3% of assets. The company is one of the world’s leading gold-producers, employing about 30,000 employees and contractors, the majority of whom work at operations in the United States, Australia, New Zealand, Peru, Indonesia and Ghana.

In the chart above, you can see that NEM has been consolidating within a “Megaphone Bottom” pattern. Also known as a “Broadening Bottom,” this formation is considered to be bullish in nature, zig-zagging within an expanding price range until price spikes sharply up and out of the pattern.

Profit Scanner did provide us with three bullish event signals starting on Nov. 20 when NEM traded for just $17.68 per share. This was about as close to calling a bottom as it gets, using a positive crossover in the KST oscillator to flag bullish momentum behind the stock.

It was a gutsy call when you consider the fact that NEM had done nothing but drop from the low $70s all the way down to about $15 per share leading up to the impressive call to catch the falling knife. With the stock now trading for around $32.33, investors who traded on the Profit Scanner signal back in late November would be sitting on gains of up to 82% if held through today.

Profit Scanner powered by Recognia can help traders of all levels uncover these signals to determine the best timing to buy. Or use Profit Scanner’s technical insight to validate your own trading ideas. See how easy this powerful tool is to help you uncover hidden opportunities in the market.


Article printed from InvestorPlace Media, https://investorplace.com/2016/05/basic-materials-dd-dow-nem/.

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