went through all 11 US sector ETFs and came out with a clear conclusion — Basic Materials is one of the two best swing trade setups in the current market. Clean weekly trend, healthy RSI, real momentum without being dangerously extended.

But knowing a sector is strong isn't enough. You need to know which stocks within it are worth trading, which ones have already run too far, and which ones to avoid altogether. That's what this post is about.

I spent this weekend going through the XLB sub-sectors and individual names. Here's what I found.

Two Sub-Sectors Standing Out

Within Basic Materials, two areas are clearly leading right now.

Steel is up over 20% in a month, 25% year to date, and more than 70% over the past year. Three things are driving it. First, infrastructure spending — the US is still in the middle of a significant buildout of roads, bridges, grid upgrades, and data centres. All of it is steel-intensive. Second, defence manufacturing — with geopolitical tension elevated globally, defence budgets are rising and military hardware requires a lot of steel. Third, tariff protection — US tariffs on imported steel shield domestic producers from cheaper foreign competition and keep pricing supported. These are structural, longer-term tailwinds. They don't switch off with a single headline.

Aluminium is arguably even more interesting right now, and the catalyst is more immediate. Up 18% in a month, 37% year to date, and nearly 200% over the past year. A significant proportion of global aluminium trade passes through Gulf region logistics, and the ongoing US-Iran situation has pushed aluminium prices to four-year highs. North American domestic producers face no supply disruption — they're sitting at home, making aluminium, and selling into a global market where the international competition is struggling to ship product. US tariffs on imported aluminium add a structural floor under domestic pricing on top of that.

The distinction between the two matters. Steel's tailwinds are longer term — infrastructure and defence spending don't evaporate quickly. Aluminium's case is more event-driven, tied specifically to the Hormuz situation. If a ceasefire holds and shipping normalises, some of that aluminium premium fades. That's partly why CENX is the priority trade right now — the catalyst is live and active — while the steel names can afford to wait for a better entry.

This isn't just chart momentum — there's a fundamental reason these stocks are moving.

The Stocks — Starting With the Best Setup

CENX — Century Aluminum — Best Setup

This is the standout name from the entire screening session, and it's not particularly close.

What I look for in a swing trade setup is a clean trend structure, a healthy RSI that's had a proper reset, and volume that confirms buyers are in control. CENX ticks every box.

The chart has been in a disciplined staircase uptrend since August 2024. Not a vertical rip — a proper series of higher highs and higher lows, with every meaningful dip bouncing off the 200-day moving average. The moving averages are cleanly stacked — green above yellow above red — throughout.

It's currently pulled back from recent highs around 650 down to 607. Sitting right between the green and yellow MAs, which is exactly where a healthy pullback should land in an uptrend. RSI is at 51 — neutral. In an uptrending stock, a neutral RSI is the sweet spot. The momentum has reset without the trend breaking.

The volume profile backs it up. Volume on the pullback is lighter than volume on the move up. That tells you sellers aren't in control — this is healthy consolidation, not distribution.

Pure domestic aluminium producer. Direct beneficiary of the Strait of Hormuz supply disruption and aluminium tariffs. The fundamental tailwind is as clear as the technical setup.

Entry plan: Confirmation candle holding above the green MA in the 5,900–6,000 zone. Stop below the swing low at 5,671. Target is a retest of the highs at 6,500 and beyond. The risk/reward is clean and defined. Alert set at 6,000.

This is the number one priority trade from this whole research session.

The Steel Names

STLD — Steel Dynamics — Watch, Wait for Pullback

The best long-term chart structure of the steel names. Clean uptrend from October 2024, consistent higher highs and higher lows, with the 200-day MA acting as a rising floor throughout. The April selloff tested that 200MA around 19,000 and bounced decisively — textbook support hold.

Since then, it's gone near-vertical — from around 180 to 226. Volume on that move is the highest on the chart. Real institutional buying behind this.

The problem is the RSI is at 77. Overbought! The entry was weeks ago. Chasing here is exactly what the framework exists to prevent.

I want to see a pullback to the green MA in the 205 – 210 area, a few days of consolidation, and a confirmation candle. Alert set at 210.

NUE — Nucor Corp — Watch, Wait for Pullback

Similar story to STLD. Had a messier period through late 2025 — choppier price action — but the April bounce has been decisive. Bottomed around 150–155 and ripped to 214. Volume on the recovery confirms real buying pressure.

RSI is at 79 — the highest of everything I screened. Even more overbought than STLD. Entry plan is a pullback to the green MA in the 19,000–19,500 area, with secondary support at the 200MA around 18,179. Confirmation candle non-negotiable.

If I can only take one steel name, STLD is preferred — cleaner long-term structure, slightly less overbought.

RS — Reliance Inc — Secondary Watch

This is the highest-quality fundamental name in the steel group. Ten-year return of 389%. A distribution model rather than pure manufacturing, which means lower cyclicality and more stable earnings. The boring compounder of the group.

The chart was in a downtrend from August 2025 through April 2026, grinding from around 37,000 down to 29,000. The April recovery has ripped it back to 35,182 but RSI is already at 75. Volume on the bounce is strong and the moving averages are starting to re-stack. But it needs time to digest. Not urgent when CENX and STLD offer cleaner entries right now.

Wait for RSI to reset below 60 and a pullback to around 3300.

The Passes

AA — Alcoa — Secondary Watch, Not Yet

Long-term trend intact — a clean staircase from around 1,500 in July 2024 to a peak of 8,000 in early April. The structure is sound. But AA has sold off 25% from those highs to 6,593, and the bounce isn't convincing yet. Moving averages are not cleanly stacked — green is below yellow, both flattening. Volume on the selloff candles was heavier than bounce volume. That's the wrong profile.

CENX is the better aluminium trade right now on every metric. AA needs more time to base. I'll revisit if it can reclaim the green MA with conviction and RSI gets back above 55.

PKX — POSCO Holdings — Pass

Performance numbers look decent but the chart is whippy — large wicks, erratic candles, no clean structure. Hard to define a stop with any confidence. More importantly, PKX is a Korean ADR, which means currency risk, Korean geopolitical exposure, and lower liquidity versus the domestic names. That's unnecessary complexity when STLD and NUE are sitting right there in the same sub-sector.

Don't overcomplicate it when cleaner alternatives exist.

MT — ArcelorMittal — Hard Pass

The chart is broken. MT peaked around 6,000 in February 2026 and dropped 30% to around 4,200 through March and April. The bounce has brought it back to 5,058 but the moving average structure is a mess — green below yellow, both below a flattening 200MA. Price is sitting below all three. Volume on the selloff was heavy.

This needs months to repair. Revisit only if it can reclaim and hold above the 200MA with real conviction.

A Word on Volatility — Because This Sector Will Test You

Before I get to the actual trade plan, I want to be straight with you about something. Basic Materials — and particularly aluminium and steel right now — is not a calm, steady sector to be involved in.

These stocks move on headlines. Not gradually. Not politely. A ceasefire update, a new round of tariff announcements, an escalation in the Strait of Hormuz, a surprise inflation print — any of it can move these stocks 5, 8, 10% in a single session. In either direction. That's the nature of commodity-driven equities in a geopolitically unstable environment.

I've been caught out by this before. You do the research, you find the setup, you get in — and then a headline drops that has nothing to do with the company itself and the stock gaps down 7% before you've had your morning coffee. It's frustrating. But it's the reality of trading in this space.

That's exactly why the risk management framework exists and exactly why it has to be honoured without compromise.

Stop losses are not optional in these names. They're not a suggestion. If you're getting involved in CENX or STLD without a clearly defined stop, you're not trading — you're gambling. The stop tells you in advance what you're willing to lose. It removes the emotional decision-making in the moment when a bad headline hits and your brain is telling you to hold on and hope.

And when the stop gets hit — honour it. Don't move it. Don't convince yourself the thesis is still intact, so you'll give it a bit more room. The stop is there because you defined your maximum acceptable loss before you entered. The moment you start overriding it, the whole framework falls apart.

The position sizing matters for the same reason. At 1% account risk per trade, a stop getting hit is uncomfortable but survivable. You live to trade another day. Double or triple the size because you're convinced about a name, and a bad headline can do real damage to your account.

The upside in these stocks during the right conditions is real — CENX up 293% year to date tells you that. But that kind of return comes with that kind of volatility attached.

The priority trade is CENX. Alert set at 6,000 — I want to see a confirmation candle above the green MA before any entry. Stop below 5,671.

STLD is the priority steel name, with NUE as the backup if STLD doesn't give an entry first. Both need to pull back to their respective green MA levels — 20,500–21,000 for STLD, 19,000–19,500 for NUE — before I'm interested.

RS and AA are on the secondary watchlist. No rush on either.

Standard framework applies throughout: 1% account risk per trade, maximum four simultaneous positions, confirmation candle is non-negotiable, and I'll be checking earnings dates on CENX, STLD, and NUE before pulling any trigger. No entries within two weeks of earnings — ever.

Next post I'll be doing the same deep dive into Energy. XLE was the other sector that stood out from last weekend's review, and there are some interesting names in there worth going through properly.

See you in the Next One!

This is not financial advice. This is a personal research and trading journal where I share ideas, observations, and how I'm thinking about markets in real time. Nothing I publish should be taken as a recommendation to buy, sell, or hold any security.

Markets carry risk, and every investor or trader has different objectives, time horizons, and tolerance for losses. Please do your own research, verify the facts for yourself, and make decisions based on your own circumstances. If needed, seek advice from a qualified financial adviser. Past performance is not a guide to future returns, and all trading involves the risk of loss.