From Taki Tsaklanos: Monday was another positive day for stock markets, with most indexes gaining around 0.50%. One of the drivers in the stock market are steel stocks. While they have substantial momentum, the question at the top of the minds of investors is whether this will continue.

Steel stocks are represented by the SLX ETF. Almost one third of the holdings of SLX (28% to be very precise) are two steel stocks: Rio Tinto (symbol RIO) and Vale (symbol VALE), so clearly this fund is very top-heavy with just two companies representing a massive portion of the market.

Steel stocks higher – how high can they rise?

The daily chart of the steel stocks sector, represented by SLX, looks spectacular. SLX went up more than 250% in the last 13 months. Note how trading volume has risen as well, though it seems that volume has peaked in the November – December timeframe.

How much gas does this rally have left in the tank? We’ll have to wait and see, but another 25% or so doesn’t seem out of the question.

The Market Vectors Steel ETF (NYSE:SLX) was unchanged in premarket trading Tuesday. Year-to-date, SLX has gained 18.74%, versus a 4.13% rise in the benchmark S&P 500 index during the same period.

SLX currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #26 of 121 ETFs in the Commodity ETFs category.

This article is brought to you courtesy of Investing Haven.

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