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Insights: Bullish Stocks

Widespread base patterns throughout Manufacturing

With attention directed at Tech and Energy--for opposite reasons: the former's uncharacteristic decline and the latter's equally uncharacteristic rally--our Manufacturing Sector is quietly breaking out to all-time price and relative strength highs. An overweight, to say the least, is justified here.

Setting the stage for Manufacturing's relative strength breakout was a multi-year base pattern (see chart below). And it is patterns like this, taking the shape of either a sideways or “rounding” consolidation, that tend to act as foundations for new advances, such as the one we are now seeing. With that in mind, we sifted through the Sector, looking for individual stocks exhibiting similar patterns. In today's report we highlight these favorable set-ups.

Notable Group-related themes:

• Aero/Defense-related (MF-03-09). Aero/Defense is an internal leader, led by names like BA and RTN. That said, these names are extended; better opportunities exist in names just beginning to emerge from base patterns: HII, TXT, HXL, and CW... see page 2

• Auto Parts (MF-12, 13). Both our large- and small-cap Groups are breaking out from multi-year base patterns. Constituents exhibiting similar set-ups: ALV, LCII, MOD, SPAR, PCAR, and MLR... see page 3

• Industrial Rental Equipment (MF-30). Lots to like about this Group--its RSR ranking (“2”), its breath, and its three-year base pattern. Actionable names: URI and HEES... see page 5

• Building Products & Fixtures (MF-31). The Group is bullishly inflecting following a 9-month consolidation. Highlighted base patterns: SSD and BLDR... see page 6

• List of highlighted charts: ALV, BDC, BLDR, CW, EMR, HDNG, HEES, HII, HURC, HXL, ITT, KAMN, LCII, LNN, MGRC, MLR, MOD, NNBR, NPO, PCAR, SPAR, SSD, SXI, TEX, TRN, TRS, TXT, URI, VICR, VMI, WSO, WTS

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