Industrials at record highs, and four stocks could be best chance to play catch-up

These stocks could be the best way to catch up to the industrials rally

Industrials are having an industrial-sized rally.

The XLI industrials ETF, which includes Boeing and Honeywell, notched record highs on Friday for the second day in a row. The ETF is also up more than 3% this month in one of the top performances in the S&P 500.

Craig Johnson, chief market technician at Piper Sandler, likes the group as a whole but says one stock stands out.

"We're overweight the industrial sector," Johnson said on CNBC's "Trading Nation" on Friday. "Look at stocks inside of [the XLI], take a look at the chart of 3M. If we look at this chart, you can see that the stock looks like it's making a bottom."

"From our perspective, we can see it move back to the highs we've seen in 2018 and 2019. It's just about 22% upside from here so we would be a buyer of those shares here," said Johnson.

Danielle Shay, director of options at Simpler Trading, says any weakness relative to the mark can probably be pegged to the U.S.-China trade war. However, she does see some opportunity in a few names.

"The space within the industrials that's been very strong is aerospace defense. For that reason, I looked at Textron and even though it's one of the laggards within the space, I prefer Lockheed. Northrop, I like that one in the long run due to the ongoing geopolitical tensions."

She is recommending all three. Textron, Lockheed and Northrop have all outperformed the market this month.