Prepare to Steel Money

I have been watching the Basic Material sector for some time now and been itching at an opportunity to get back in. I have been an avid fan of them during the first half of 2008; however, the summer months haven’t been very good to this sector.

Many of the “best of breed” stocks in this category have gotten unfairly oversold. Now don’t let this mini-rally fool you. There is no rush to jump in. In fact these stocks could easily go down lower before moving higher. At the same time, there is so much room to move up that you shouldn’t worry about missing out on a 4-5 point rise. We can easily sit back and wait for the strong trend to develop.

My recommendation is to pick some stocks within the Basic Material sector and watch them like a hawk. Be ready to pounce when the time is right. I STRONGLY feel that this sector will be the first to rocket when investors come to their senses. These type of stocks generally move in large chunks at a time, so you can bet on making great returns.

When is the time right?

This question can really only be answered by your specific time frame and ability to take on risk. Like I stated earlier these stocks could easily head lower before heading higher. The mini-rally we had today will be trap, and these prices will most likely get smaller. That being said I would become really interested to enter some positions after the next so-called “slaughtering” of sector.

Find the price of the stocks you are following before this mini-rally, and then get the trigger ready after they come back to that same level. It is really as simple as that.

If you are able to wait it out some time and take on the risk, then you can always buy the stocks right now as the prices should rise much higher then the current prices of those stocks.

Good Stocks to Follow

Here is a list of a few quality stocks in the Basic Material sector that should easily head up when things are right.

  • Caterpillar – CAT
  • Steel Dynamics – STLD
  • Nucor – NUE
  • AK Steel – AKS
  • ArcelorMittal – MT

I will be tracking these as well. Any out stocks in this sector we should be on the look out for?

INO - Check out a FREE trend analysis of the Basic Materials

More on this topic (What's this?)
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Investing in Brazilian Steel: Four Companies Set to Profit From Transportation Infrastructure (Investment U, 12/21/09)
STEEL IMPORTS DECLINE 50% VERSUS 2008 (THE PRAGMATIC CAPITALIST, 11/26/09)
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