We often hear about a stock picker's market but it feels currently more like a sector-specific market. While energy has caught some of my attention, the strongest stocks I've seen have come from the industrial goods sector.
There have been many names toying with breakouts and a few that are showing the breakout strength today. Much of this is coming from the relationship to building and general construction.
Two smaller names worth a look popped up on my radar today. Jumping down into the billion dollar market-cap space can make for some thinner trading. But when it comes to the small-cap space, a $1 billion market is at least toward the upper end. I'll take some speculative chances there from time to time if I can find a few names with good potential, a strong sector and a clear stop. Babcock & Wilcox Enterprises (BW) along with Trex (TREX) fit the profile.
BW is a relatively new issue which has struggled since August. After spending the better part of the last two months finding a bottom and consolidating the recent selloff, the bulls look to be seizing control here. The stock has broken above the higher from October in terms of both price and the Relative Strength Index (RSI). While the RSI is showing a strong momentum, there is plenty of room for a run higher.
I wouldn't put much weight in just the RSI, but we also have trend, volume and volatility working for the stock. Price is pushing through the Upper Bollinger Band. At the same time we are seeing new highs in the Commodity Channel Index (CCI) and Force Index when compared to the recent October breakout attempt.
Lastly, the 10-day simple moving average (SMA) has crossed above the 50-day SMA. I will place a stop here at $17 and look for an upside move to the $19.50 area.
TREX's setup shows price breaking above resistance and the upper Bollinger Band while the CCI is hitting highs not seen for five months. The RSI is lagging just a bit behind price, but still trending strong and higher. The Force Index is bullish but also a bit behind October's print due to the strong 20% push in the stock off lows.
I like the potential of the gap fill here just above $45 per share. Should TREX retrace back under $41, I don't want to be in the name. I would base that on a closing basis as the 10-day SMA could offer some support on an intraday drop.
Overall, I find BW the more attractive of the two and weighted that name slightly more than TREX, but I have taken positions in both. Given their small-cap nature, I wouldn't weigh either position more than 2% in a portfolio.