Industrials stocks are busting out to new highs.
The XLI industrials ETF soared to records on Thursday, while United Technologies and Kansas City Southern notched their own all-time highs. Caterpillar and UPS also moved to their highest levels of the year.
"I think [this rally is] to be trusted," Katie Stockton, founder of Fairlead Strategies, told CNBC's "Trading Nation" on Thursday. "It's a little bit early to say, but it looks like the industrial sector is breaking out relative to the broader market after a long-term basing phase so that's very promising."
The XLI ETF, whose components include Boeing, Honeywell and Union Pacific, has added 4% in the past week, more than double the gains on the S&P 500.
"Of course, on the individual stock level, we're seeing a lot of breakouts in absolute terms," Stockton said. "Some stocks are reaching new all-time highs like UTX, and some are just reaching interim highs like UPS and others. But, to me that tends to exacerbate the momentum behind a move, and I think it can persist."
A few names that stand as buys above the rest, according to Nancy Tengler, chief investment strategist at Tengler Wealth Management.
"I think in this space you want to be collecting an above-market dividend yield like you are with UPS and also UTX. That way you're getting paid to wait while these stories work out," she said during the same segment.
UTX's dividends yield 2% and UPS' 3%. Both have a higher yield than the S&P 500 and broader industrials sector.
"UPS put up great earnings this last quarter — growth in margins to the tune of 150 basis points all the while they were investing in the business. So to see the transports lead is bullish for us as investors but also for the overall market, so we're looking at things like UTX, UPS, Boeing, and even 3M is starting to behave," said Tengler.
Disclosure: Tengler Wealth Management holds UTX and UPS.
