BREAKING: Indexes Suffer Painful Week; Big Tests Ahead
Dow Jones giant Caterpillar (CAT) leads five construction-related stocks near buy points that should benefit from infrastructure spending increases. United Rentals (URI), Terex (TEX), Deere (DE) and Martin Marietta Materials (MLM) also make this list of stocks to watch for the week ahead.
All of the companies should see a boost from the recent infrastructure bill and the Inflation Reduction Act. The infrastructure spending plan, which was approved last fall, will dole out more than $500 billion for various projects. And the Inflation Reduction Act includes $369 billion to expedite mining projects and build out renewable energy infrastructure.
Meanwhile, the market is in a confirmed uptrend as the Nasdaq holds above its 50-day moving average and the S&P 500 tests its 200-day line.
Caterpillar was a recent IBD Stock Of The Day and it leads the Construction/Mining Group according to the IBD Stock Checkup. The construction giant has rallied nearly 50% since bottoming in late September, and saw positive earnings and revenue growth the past two quarters.
CAT stock is near a 238 buy point for its cup base. Shares broke out on Nov. 11 but have since pulled back to drop slightly below the 21-day exponential moving average. That could serve as a constructive shakeout. The recent sideways action could be seen as a handle on a long consolidation back to June 2021, which indicates a 239.95 buy point. In another week, that handle could be a flat base, with that 239.95 entry.
CAT stock is 7.6% above its fast-rising 50-day moving average.
Caterpillar has a 95 Composite Rating, which combines a number of technical indicators into one score that maxes out at 99. CAT stock’s relative strength line is shy of its highs from early November. But it maintains a strong 91 RS Rating, meaning the stock has outperformed 91 % of its peers in the market. And Caterpillar has an 85 EPS Rating as its earnings results pick up momentum.
United Rentals was Tuesday’s IBD Stock Of The Day and is a member of the esteemed IBD Leaderboard watchlist of top growth stocks. Earnings growth for the world’s largest equipment rental company fluctuated over the past seven quarters, averaging roughly 40% gains during that time. Revenue grew an average of 20.2% over the span.
URI stock is up 36% after rebounding from September lows and about 4% off its 52-week highs.
Shares are in a yearlong consolidation with a 368.04 handle buy point. URI stock could have an early entry opportunity above Friday’s high of 363.47.
United Rentals leads the Commercial Services-Leasing Group for the IBD Stock Checkup. URI stock has a perfect 99 Composite Rating and a near-perfect 96 EPS Rating. Shares’ relative strength line is close to their highs for the year, and United Rentals has a 91 RS Rating.
Economy, S&P 500 Face Hard Landing — Unless The Fed Does This
Materials processor and machine maker Terex ranks third in the Construction/Mining Group according to the IBD Stock Checkup. The company’s earnings and revenue jumped 79% and 13%, respectively, for the most recent quarter after three periods of decelerating gains.
TEX stock is consolidating after big run following the breakout from its cup base in late October. Shares are up about 13% from the pattern’s 38.41 buy point. TEX stock pulled back more than 6% since mid-November, which could be seen as a handle for a massive consolidation stretching back to the beginning of the year. In that case, the larger consolidation has a 46.57 entry point. The handle could become its own flat base in another week.
Terex fell 5.5% to 43.52 last week, closing Friday below its 21-day line for the first time since Oct. 14.
TEX stock’s relative strength line is near highs for the year and it has an impressive 93 RS Rating. Terex has a 90 Composite Rating. However, plunging earnings in 2020 put the company’s EPS Rating at 66.
Agriculture equipment manufacturer Deere leads IBD’s Machinery-Farm Group. Deere’s revenue has steadily increased over the past three quarters. And earnings saw two consecutive periods of decelerating growth before spiking 81% with the most recent results.
Deere stock has been even greener than the company’s tractors lately. Shares are way up after a big run going back to late September. DE stock broke out from its cup-with-handle base on Nov. 11 and is up more than 8% from the 406.2 buy point. With Friday’s retreat, DE stock fell 2.4% to 434.81, missing out on a a three-weeks-tight pattern. But shares are still trading tightly.
Ideally, DE stock would move sideways, letting the 21-day and even the 50-day line catch up as it forms a new base.
Deere shares have outperformed 94% of its peers in the stock market so far this year, and its RS Rating of 94. DE stock has a stellar 96 EPS Rating after only reporting one quarterly decline in the last eight periods. And Deere has a perfect 99 Composite Rating.
Martin Marietta in the Building-Cement/Concrete/Aggregates industry group, which is led by Eagle Materials (EXP). The building materials and concrete supplier shed 19% from its stock price so far this year, but started to recover at the beginning of the summer.
Martin Marietta earnings fell 61% in the first quarter but they improved to 4% growth and 10% growth for the second and third quarter, respectively. Meanwhile, revenue gains slowed from 27% growth in the first quarter to 16% growth over Martin Marietta’s last four quarters.
MLM is forming a cup-with-handle “bottoming” base. The stock ascended to 365.15 by mid-August from its July low of 296.05 before declining again to form the cup-with-handle pattern.
The current base has a 371.57 buy point at the peak of its handle, which formed as Martin Marietta stock slid a little more than 1% over the past three weeks. MLM stock is holding onto its 21-day line.
MLM stock has an 86 Composite Rating and 86 EPS Rating. However, shares are just in the top half of market performers this year with a 64 RS Rating.
You can follow Harrison Miller for more stock news and updates on Twitter @IBD_Harrison
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(© Gary Neill)
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