There’s a great rotation happening in the markets, and transports could take the driver’s seat: Oppenheimer technician

After trailing the S&P 500 during the past year, transports stocks could have their turn in the driver's seat, according to one technician's forecasts.

"Transports are an attractive rotation idea, and they could be that next area to lead equities higher," Ari Wald, head of technical analysis at Oppenheimer, told CNBC's "Trading Nation" on Monday. "Transports have been more or less an underperformer since 2015 and, in recent years, have been kind of [flat] on a relative basis."

The iShares Transports IYT ETF, which holds 20 top transportation stocks such as UPS and FedEx, has been largely shut out of gains during the past year. It has fallen around half a percent over the past 12 months, while the S&P 500 is up nearly 16 percent over the same period.

Wald says the charts show the group might be priming for a breakout.

Transports are "inflecting from that rising 200-day moving average," said Wald. "We think that line is going to continue to move higher, and that's going to be signifying for us that the rotation is going to go into this transports group."

The IYT has held above its 200-day moving average since breaking above that level in August. Its 200-day moving average trend line has been on the rise since bottoming out in September 2016.

From a fundamentals perspective, Michael Bapis, partner and managing director at the Bapis Group at HighTower Advisors, says the rise in e-commerce is the most important catalyst for transports names.

"There's got to be transportation," Bapis told "Trading Nation" on Monday. "Everybody wants the product now as soon as they can get it and I think the companies in the transports that can get that right will flourish because of it."

The IYT ETF could make significant moves after the closing bell Tuesday when FedEx reports third-quarter earnings. The U.S. delivery service has 15 percent weighting in the IYT ETF, the most influential stock of the 20.

"For FedEx, it's really kind of a classic buy signal for us," said Wald. "The stock has corrected with the market more recently and it's corrected above a rising 200-day moving average."

FedEx shares slumped 6 percent in February, victim to the broader sell-off in equities that sent the S&P 500 briefly into correction territory. FedEx shares are currently 9 percent lower than a 52-week high set in January and have held above a 200-day moving average for the past 12 months.

"It is oversold in an uptrend using that 200-day moving average as a proxy for trend both in absolute terms and relative to the market," said Wald. "FedEx is at an inflection point right here."

The strength of FedEx lies in its reputation and industry leadership, adds Bapis.

"If you have something that's very important that needs to get delivered, what company are you going to use to get it there overnight?" said Bapis. "They're the most trustworthy from all of the consumers out there, and I think they will continue to be so for the foreseeable future."

FedEx is expected to post a 32 percent increase in earnings over the three months to February and a 9 percent rise in sales. Its third quarter includes a typically busy December Christmas season.

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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

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