Transportation stocks are moving higher this month.
The next leg of the rally will be driven by the railroad stocks, according to Matt Maley, equity strategist at Miller Tabak.
"This is a group that was actually a big concern for us about a month ago when the S&P 500 railroad index made a lower low and it looked like it was going to take the group lower, and this was particularly important because the railroads have been a good leading indicator for the entire transportation index all year long," Maley said Tuesday on CNBC's "Trading Nation."
"However, they've bounced strongly in the month of October, and they're now bumping up against their September highs. So if they can negate that lower low with a nice higher high, that's going to be bullish," Maley said.
The trucking stocks could also be a key indicator for the rest of the group, particularly because they have trended upward with higher highs and higher lows, he added.
"If the transportation stocks can play catch up, that'd be great for the Dow Theory guys, and for the broad markets, so see how these groups act over the next two weeks or so," he said.
The Dow Theory posits that a move higher or lower in the Dow Jones Transportation Average typically precedes a similar move in the Dow Jones Industrial Average, and vice versa. It rests on the presumption that an economy that manufactures at a certain pace then needs a mode of transportation to move those goods domestically and internationally.
Quint Tatro, president of Joule Financial, has his eye on two transport stocks as potential breakout stars.
"C.H. Robinson is a fundamentally attractive name. They are not all that cheap — I mean they're selling 18 times forward earnings with earnings basically to be flat next year, but this past year was a 36% earnings jump. So, if they can kind of pick that momentum back up and they tell us, 'Hey, things are not all that bad and we're actually moving things across the country' I could see this stock moving higher," Tatro said during the same segment.
C.H. Robinson has rallied nearly 5% this month. However, it's down 3% over the past 12 months.
"The other one is LandStar," he added. "I don't think there's any rush to jump ahead and try to play earnings, no reason to be a hero here, but … this one has a really exceptional backdrop regarding the balance sheet and a nice dividend as well, so keep an eye on these two stocks."
LandStar is up 11% in the past three months and 28% for the year.