While there is scattered strength among many of the better-known industrials, such as those that make up the top holdings of the Industrial Select Sector SPDRS ETF (NYSE: XLI), a number of smaller industrial stocks, particularly in manufacturing, have begun to pullback to levels where traders have been more inclined to buy than sell. Should these stocks continue lower here in the final days of February, there’s a good chance that many will trade low enough to finish in technically oversold territory before the end of the week.
Additional selling could easily put a stock like Ingersoll-Rand (NYSE: IR) in oversold territory, for example. Although trading nearer to short-term highs than short-term lows, IR had closed lower for three days in a row heading into Monday’s session, and in trading lower on Monday, earned a “consider buying” 9 out of 10 rating early in the session. The stock also has a short-term, positive edge of more than three-quarters of a percent.
Earning a one-point upgrade intraday on Monday were shares of Cummins (NYSE: CMI). The ratings upgrade, which boosted the stock from a neutral, 7 out of 10, to a “consider buying” 8 out of 10, comes as the stock pulls back from new, 52-week highs to finish lower for a second day in a row. Shares of Cummins have been trading in bull market territory since mid-January and will open Tuesday with a positive edge in the short-term of over half a percent.
Although buyers have kept shares of Dover Corporation (NYSE: DOV) from finishing near session lows on Monday, the stock has still closed lower for three out of the past four trading days, and is at its most technically oversold since climbing into bull market territory in the first half of January. With a short-term edge of more than a third of a percent, shares of DOV have moved from neutral to “consider buying” with a one-point ratings upgrade to 8 out of 10 midway through trading on Monday.
It’s worth pointing out that if weakness in industrial stocks becomes more widespread, the stocks in this report could become even more oversold despite already earning top ratings and developing statistically significant edges. The XLI, mentioned above, has closed overbought for three out of the past five trading days, including on Monday, as the fund edged back toward the top of its now three-week long trading range.
David Penn is Editor in Chief of TradingMarkets.com