5 ‘No Taper’ Breakout Stocks to Buy

by Anthony Mirhaydari | September 19, 2013 1:46 pm

Federal Reserve Operation Twist[1]The Federal Reserve has made its ruling: No tapering.

At least not yet. For now, the Fed’s $85 billion-per-month long-term bond buying stimulus will continue.

That decision set off another rip-roaring, liquidity-fueled, melt-up in the stock market Wednesday as investors climbed over themselves to buy up positions in Fed-sensitive, interest-rate dependent assets. Gold and silver. Treasury bonds. Mortgage REITs. Homebuilder stocks. Steelmakers. Stuff like that.

Here’s a look at five stocks to buy that are zooming higher in response, breaking out of multimonth downtrends in the process:

Invesco Mortgage Capital

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Long-term interest rates dropped hard in the wake of the Fed decision, sending mortgage REITs on the move on both a play for yield as well as hopes that some rate relief will bolster the housing market. The housing market had suffered as the yield on 10-year Treasury bonds had climbed from 1.7% in May to near 3% recently.

As a result, Invesco Mortgage Capital (IVR[2]) looks ready for a push to at least its 200-day moving average.

Two Harbors Investment Corp.

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Two Harbors Investment Corp. (TWO[3]) is another mortgage REIT that focuses an residential mortgage-based securities — securities that are suddenly poised to become more valuable in the wake of Wednesday’s decision.

A return to the March highs would be worth a 20% move from here for the Best Stocks of 2013[4] entrant.

D.R. Horton

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Just as mortgage stocks are getting relief, homebuilder stocks are also perking up. D.R. Horton (DHI[5]) is surging through its upper Bollinger Band for the first time since April.

Southern Copper

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It wasn’t just the bond market that benefited from the no-taper decision; commodities did, too, on a combination of higher economic growth expectations and the rising specter of inflation as the cheap money continues to close.

That’s helping Southern Copper (SCCO[6]) — a copper miner based in South America — exit a big downtrend pattern that started in January.

Mechel Steel

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Steelmakers have been down and out since the global economy hit a speed bump back in 2011. But now, with signs of economic re-acceleration mixing with a continuation of the Fed’s monetary policy stimulus, the entire industry group is coming back to life.

Mechel Steel (MTL[7]) is moving up and out of a tight four-month consolidation pattern that took the stock all the way back to its 2009 bear-market low near $3 a share.

I’ve added a number of these positions, and a few others I didn’t mention, to my Edge Letter Sample Portfolio.[8]

As of this writing, Anthony Mirhaydari has recommended MTL, SCCO, DHI, TWO and IVR to his clients.

  1. [Image]: http://investorplace.com/wp-content/uploads/2011/12/7FederalReserve.jpg
  2. IVR: http://studio-5.financialcontent.com/investplace/quote?Symbol=IVR
  3. TWO: http://studio-5.financialcontent.com/investplace/quote?Symbol=TWO
  4. Best Stocks of 2013: http://investorplace.com/best-stocks-for-2013/
  5. DHI: http://studio-5.financialcontent.com/investplace/quote?Symbol=DHI
  6. SCCO: http://studio-5.financialcontent.com/investplace/quote?Symbol=SCCO
  7. MTL: http://studio-5.financialcontent.com/investplace/quote?Symbol=MTL
  8. Edge Letter Sample Portfolio.: https://www.edgeletter.com/sample.php

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