Trade war fears have weighed on the sector, but this pair could bounce
Industrial stocks have taken a hit recently, amid concerns about a global trade war. While Boeing (BA) has been the primary target of speculation about Chinese retaliation, several other stocks in the sector have moved lower in recent sessions. However, if history is any indicator, traders should consider buying the dip on industrial stocks Terex Corporation (NYSE:TEX) and MasTec, Inc. (NYSE:MTZ).
TEX Stock Testing Multi-Layered Support
Since touching a nine-year high of $50.17 in late January, Terex stock has dropped roughly 22%, and was last seen trading at $39.09. TEX shares found support in the $38-$39 vicinity, which represents a 38.2% Fibonacci retracement of their rally from 2016 lows to the aforementioned 2018 peak. What's more, TEX is now within one standard deviation of its ascending 320-day moving average. Following the last three similar pullbacks to this trendline, TEX stock went on to rally an average of 10.54% over the next month, according to Schaeffer's Senior Quantitative Analyst Rocky White.
Should the security once again bounce off familiar support, a round of short covering could add fuel to the fire. Short interest on Terex surged 14.1% during the most recent reporting period, and now accounts for nearly 11% of the stock's total available float, or about a week's worth of pent-up buying demand, at TEX's average pace of trading.
Likewise, a round of upbeat analyst attention could also help the stock rebound. Currently, just four of 14 analysts consider TEX worthy of a "buy" or better endorsement, leaving the door open for potential upgrades on a big bounce.
Options traders looking to speculate on TEX's short-term trajectory can do so at a relative bargain, too. The stock's Schaeffer's Volatility Index (SVI) of 35% is in just the 21st percentile of its annual range, suggesting relatively low volatility expectations are being priced into near-term Terex options.
MasTec Shares Could Be Flashing 'Buy'
While Terex shares are looking to snap a three-day losing streak today, MasTec stock was last seen 1.8% lower at $49.95. Nevertheless, the security could be flirting with 18-year highs again in no time, if past is prologue.
After peaking at $55.52 in early February, MTZ stock pulled back with the broader equities market. The shares are now within one standard deviation of their 80-day moving average -- a trendline that helped the equity more than triple from early 2016 to mid-2017. In fact, there have been eight similar pullbacks during the past three years, and MTZ was higher one month later 75% of the time, averaging a healthy gain of 7.32%. A similar rally from current levels would put MasTec stock around $53.60.
As with TEX, MTZ could also benefit from a short squeeze, should the security once again bounce off its 80-day. Short interest represents roughly 13.5% of MasTec's total available float, and would take almost seven sessions to buy back, at the stock's average trading volume.
Likewise, options players who want to speculate on MTZ in the short term can pick up contracts at a relative discount. The stock's SVI of 34% is higher than just 21% of all other readings from the past year.