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Three Dow stocks could lead the next leg of the rally, traders say

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These Dow stocks could lead next leg of the rally, traders say

The Dow Jones Industrial Average is breaking records again.

The blue-chip index hit an all-time high above 35,000 on Monday, before closing lower. Stocks such as 3M, Walgreens and Procter & Gamble led the gains.

But those stocks may not be the best bets to lead the next leg of the rally.

"We'd be looking at two of the more stodgy technology names," Joule Financial President Quint Tatro said, highlighting Intel and Cisco as his top picks.

Intel was the worst-performing Dow stock on Monday, falling 3%, as the entire tech sector came under pressure. Cisco also fell.

"Intel, which we feel has been really beat up and really not rightfully justified, is a great value opportunity for us, we feel, trading round 12 times forward [earnings], very, very healthy balance sheet and paying us almost 2.5% to wait," he told CNBC's "Trading Nation" on Monday. "We think that they're going to benefit as investors and traders look back towards technology stocks."

Intel is nearing a bear market, having fallen 18% from a high set in mid-April.

"The same goes with Cisco. Cisco is trading very cheap on a forward basis and has a better balance sheet than Intel and pays us almost 3% to wait," said Tatro. "Just like we didn't chase them off when everybody was chasing them in February and March, we're buyers of the dip here in some of the technology and growth names."

Ari Wald, head of technical analysis at Oppenheimer, is making a play in the industrials space.

"Our idea here would be Honeywell International," Wald said during the same interview. "We're bullish on the industrial sector, recommend an overweight positioning, and we believe Honeywell is turning up on a relative basis to boot."

Charting Honeywell relative to the S&P 500, the stock underperformed in 2019 into the first half of 2020, broke out in the fourth quarter, but has since consolidated.

"It's moved lower to sideways, while the 200-day average has caught up to that ratio and now we think is in a position to turn higher and regain that outperformance," said Wald.

Honeywell has risen more than 8% this year, though underperforming the S&P 500's nearly 12% gain.

Disclosure: Joule Financial holds CSCO and INTC.

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