By: Costas Bocelli — April 30, 2020
Here’s 3 Strong Stocks Beating Back the Pandemic
Did ordinary investors just shoot themselves in the foot… again?
A recent Sentiment survey by the American Association of Individual Investors (AAII) seems to say "Yes".
According to the survey, optimism among individual investors has hit a six-month low.
Just one week ago, barely one in four (24.9%) investors surveyed described their short-term outlook for the stock market as “bullish”.
Now, today marks the last trading day of the month.
And if the recent gains in the major market averages hold today's market close, April will turn out to be a major boon for the bulls.
The S&P 500 has gained +13.7% month-to-date, and is on track to post its best monthly gain in more than 40 years.
That’s right, you’d have to go back to October 1974 to find a better monthly return for the primary benchmark index for U.S. Equities.
Earlier this month, when most individual investors were biting their nails, those in the know (the ones in tune with the “true market”) began to see signs that "internal strength" was returning.
At the beginning of April, the dreaded “death cross” was triggered in the S&P 500. That’s when its shorter-term moving average, usually the 50-day, crosses below its longer-term moving average, usually the 200-day.
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We discussed the “death cross” in the April 8th edition of True Market Insider. We said that by the time the cross shows up, most of the selling was nearly exhausted.
And as it happens, getting out of the stock market when that death cross was triggered has proven to be a major misstep.
From the April 8th article...
"We are now starting to see signs of bullish strength emerging among many of our internal breadth indicators. You’ll be hearing about that in the days ahead... or at least from those that are in tune with the “true market”.
Here's a look at our primary risk barometer -- the New York Stock Exchange Bullish Percent Index (NYSE BPI).
The two green arrows show how more and more stocks have been moving to "Buy" signals since the market rebounded higher at the end of March.
We now find that the NYSE BPI it self is on a Buy signal and its status is bull confirmed -- the strongest designation for this indicator.
In other words, demand is in control of the stock market.
And there's more bullish good news...
In last week’s column, we looked at how major market bottoms are typically formed. And we asked whether the March 23rd low in the S&P 500 was in fact “THE low”.
We saw that two of the most common patterns are: V-shaped Recoveries and Double-Bottom Retests.
We also flagged a powerful technical chart pattern that can indicate a potential change in trend on a price chart -- the “Outside Reversal”.
This formation has proven to be even more reliable when the outside reversal is made on a weekly chart, as was the case at the end of March.
With the S&P 500 up nearly +14% so far in April, and up more than +30% from the March 23rd low, there could be more juice in this rally. On the other hand, it’s not at all unusual for stocks to rein in a bit after a big run.
As investors, we should keep looking to buy high-quality stocks in the strongest sectors of the market. And the cheaper we can buy them, the better.
So let me leave you with three stocks that have been strong performers as the world gropes its way through the coronavirus pandemic.
These three stocks belong to three of the strongest industry groups based on the technical indicators we track in Sector Prophets Pro, our Premium data analytics program.
Here’s 3 Strong Stocks Beating Back the Pandemic
Our first ticker comes from Semiconductors, a subgroup of the broad Technology sector.
Of the 11 broad sectors, Technology continues to be the highest-ranked on a longer-term relative basis. And the Semi’s are a strong segment within Technology.
Advanced Micro Devices (AMD) is a leading chip maker. The stock recently kissed off of a recent all-time high, and is pulling back a bit. Near-term weakness should be viewed as an opportunity to buy and acquire the stock.
The second investment idea comes from Software, another strong subgroup within the broad technology sector.
There are many strong names within this group, but the most compelling right here is Cadence Design Systems (CDNS). After the mid-March purging, this stock has not only recovered, but it's breaking out to new all-time highs.
Finally, we have the Healthcare sector, a subgroup of the broad Healthcare sector.
The Healthcare sector has moved up the leaderboard and is currently ranked #2 (behind Technology).
And the Healthcare subgroup shows strong technical attributes, so it should be looked upon with favor.
Within this group, you’ll find Molina Healthcare (MOL). The stock recently broke out to new all-time highs and is now pulling back a bit in the short-term.
Buying and accumulating the stock on weakness is a good way to gain bullish exposure at a discount.
So there you have it…
Three strong stocks from three strong sectors that are beating back the coronavirus pandemic in a major way.
Just think about their potential when things return to normal (whenever that might be).
Until then, continue to stick with strong stocks in strong sectors like Technology and Healthcare.
Your portfolio will thank you for it.
See you next time,