Singapore (13 August 2021) – On Wall Street, the sectoral play is back in the game once again, with the cyclical sector now pretty much leading the action.
Not least due to the US President’s announcement on 24 June 2021 of his support for the US USD$1.2 trillion Bipartisan Infrastructure Framework followed by the Senate’s approval of the bill on 10 August. The approval paves the way for the nation’s biggest investments in roads, bridges, airports and waterways in decades boosting the commodity based sector, a move much awaited by commodity traders too.
We can identify an interesting move on the basic materials sector. The price action of the Basic Materials ETF (XLB) has surfaced from the bearish pressure of the 50-DMA. Such sentiment has pushed the basic materials price higher over 1.5% as depicted by the chart below.
Source: https://www.tradingview.com/x/OJqDBRUd/
One of the early movers in the commodity sector is Nucor Corporation (NYSE: NUE), said to be the largest steel producer in North America and is a parent company for some of the leading steel producers such as ArcelorMittal (NYSE: MT).
Nucor is a Shariah-compliant counter according to stock screener Boursa, IdealRatings, which applies the AAOIFI rulebook.
Nucor Rises On Better-Than-Expected Earnings
As of 10 August 2021, Nucor has broken out of the ideal resistance level of 110.97 which was tested on 1 June 2021. Nucor closed nearly 10% in a single day of trading on Tuesday at 118.10 with higher volume. It closed trading Thursday in New York at 125.24.
In fact, Nucor has made the ascending move after it announced better than expected earnings number on 22 July 2021, and continued its onslaught move by gapping up past the 50-DMA (Day Moving Average) on 29 July 2021. On a year-to-date performance, Nucor has shown an impressive gain of 122%.
Source: https://www.tradingview.com/x/LMs0F9lD/
There is a chance Nucor may move higher towards the 150 area provided the basic materials index (XLB) and the company fundamentals support the move.
Such an impressive move is no surprise for Nucor, as large institutional names such as Goldman Sachs, Bank of America and JP Morgan have made the buy call as early as April this year.
Nasdaq Composite Index Showing Fatigue
On the other hand the Nasdaq Composite Index which has gained over 14% year-to-date following a slow start to the year, is now showing signs of cooling off, indicating that investors’ focus could now well be on the cyclicals.
The Nasdaq Composite Index chart is showing some topping-up moves. Price had barely moved over 1% from the 14,800 area – indicating a cooling off.
One needs to pay close attention to the downside move if the index closes below the 50-Day Moving Average, which could signal heavy institutional selling.
However, a close above 14,900 could send the index potentially hitting a historical high of 15,000 indicating a bullish bias.
Source: https://www.tradingview.com/x/BjE324pB/
-/-www.halaluniverse.net
Disclaimer: Mr Mukhriz Mangsor is a Certified Financial Technician and an independent trader who contributes to www.halaluniverse.net on a regular basis. He focuses his attention on the technology stocks listed on Nasdaq. The content of this article are not recommendations to buy or sell a security. All information is intended as information for educational purposes only and not as investment advice. Readers are advised to seek professional investment advice from licensed investment advisors before investing.
