Trading Nation

Today’s market moves point to more upside for this one quietly rallying group of stocks: Trader

Key Points
  • Basic materials hit year-to-date highs on Tuesday.
  • "DuPont crushed earnings, and the whole industry group is on the move here," said's Todd Gordon.
  • Gordon sees strong technicals for DuPont, Dow, Monsanto and Freeport-McMoRan.
Trader sees upside ahead for materials sector

Tuesday's rally in basic materials has taken the group close to all-time highs, and the technicals lead's Todd Gordon to believe there is more upside to come.

The ETF that tracks basic materials stocks, IYM, climbed more than 1 percent on Tuesday to hit year-to-date highs thanks to strong earnings from one of its largest components.

"Basic materials today have been really strong," Gordon said Tuesday on CNBC's "Trading Nation." "DuPont crushed earnings, and the whole industry group is on the move here."

According to Gordon, Tuesday's move means that materials are finally "catching up on the breakout" that the rest of the market has experienced.

What's more, Gordon sees strong technicals for individual stocks in IYM. The first of these stocks is the aforementioned DuPont, which jumped more than 3 percent on Tuesday after the company beat earnings estimates. Gordon says DuPont is "just pressing that upper $82.40 area of resistance" thanks to the surge off earnings, meaning that the stock could soon break through that key level.

Dow Chemical is another stock that has caught Gordon's eye in the basic materials group. The chemical company is set to report earnings on Thursday, and its chart "virtually looks like" that of DuPont. In other words, Dow Chemical is nearing a key resistance level of $65.46 that it could break if the company beats earnings.

Together, Dow Chemical and DuPont make up 23 percent of the IYM ETF.

But Gordon's favorite among the materials is the third-largest component, Monsanto. The stock has climbed back to near one-year highs since it reported earnings in April. Not only that, but the stock's chart has formed what Gordon calls a "cup and handle" pattern, a dip in the chart usually followed by a rally upward.

"You do one more dip before we eventually break out," explains Gordon. "So I like Monsanto from $116.50 to $117."

The final stock that Gordon is looking at is Freeport-McMoRan. The stock is "an underperformer," down 2 percent year to date, but Gordon sees the stock climbing back to $14, which it hasn't hit since the end of February.

IYM has rallied this year, and the group is up about 9 percent year to date thanks to Tuesday's jump.