by Dan Burrows | April 8, 2014 1:02 pm
The market opened the second quarter with such serious and extended selling that it’s hard to believe there are any stocks with price momentum left. But … some blue chips still very much qualify as stocks to buy.
The S&P 500 notched an all-time closing high on April 2, but since then, stocks have struggled to maintain. The broader market is off more than 2.5% since then, led down by high-flying momentum stocks and sectors.
Of course, it’s always important for the market to bleed off some steam after an extended run. After all, it’s the backfilling — the buying by investors looking for better prices — that sets the foundation for new highs later. And with the S&P 500 rising nearly 10% in about two months … well, it was probably time for a breather.
However, as tempting as a selloff like this can be for anyone looking to get some deals on price, there’s no sense in buying a bargain with broken technicals. Cheap stocks can always get cheaper, and cheap stocks stuck in a downtrend can be a very expensive mistake.
When markets are wobbly, there’s nothing quite like the comfort to be found in blue chips. Happily, there are a number of these stalwart stocks — even components of the Dow Jones Industrial Average — that have both price momentum and seasonal strength.
Against this market backdrop, here are the top five stocks to buy in April:
Click to Enlarge ConocoPhillips (COP) was finally back to breakeven for the year-to-date before everything started selling off on April 2. It has held up fairly well — COP stock is off only about 1% so far this year — and now shares in the oil-and-gas giant look ready to roll.
COP stock is trading 4.2% above its 50-day moving average and 1.3% above its 200-day MA. It’s also within striking distance of its 52-week high, sitting just 6.5% below that level.
Relative strength is what really puts COP among this list of stocks to buy. An RSI reading of 59 puts COP stock well below the overbought level of 70. Furthermore, according to the Thomson Reuters Relative Strength Indicator, COP stock scores a 63 out of 100 vs. an industry average of 54.
Plus, April hasn’t been that bad for ConocoPhillips: During the past 10 years, COP stock has an average return of 3.5% for the month.
Click to Enlarge Deere (DE) came back strong from an early swoon this year to put up strong gains in March and early April. Indeed, DE stock was off as much as 8% by late February.
Today, DE stock is up about 2% on the year — and with more strength to come, should be on your list of stocks to buy soon.
Deere shares are 4.4% above their 50-day MA and 6.8% above the 200-day. DE stock also is just a handful of percentage points off its 52-week high.
DE stock also is comfortably below overbought, with an RSI of 61. Furthermore, according to the Thomson Reuters Relative Strength Indicator, DE stock scores a 62 out of 100 vs. an industry average of 54.
And DE stock also shares April fortunes with COP, averaging 4.2% gains in the month for the past 10 years.
Click to Enlarge General Mills (GIS) stumbled with the rest of the market this month, but it’s still up more than 3% for the year-to-date. That has the cereal and packaged-food company’s shares beating the broader market by a percentage point — with more outperformance on tap.
GIS stock is roughly 4% above both its 50- and 200-day moving averages, and it’s trading just 2.3% below its 52-week high.
Relative strength is a … well, strength for GIS, at 59 — high, but not overbought. And the Thomson Reuters Relative Strength Indicator puts GIS stock at 55, just above the industry average of 53.
If you’re looking for stocks to buy in April, note that the month also shines on General Mills, with average gains of 4.2% in April over the past decade.
Click to Enlarge Johnson & Johnson (JNJ) is crushing the market so far this year with 7% gains, and has ample momentum left.
JNJ, which is only a percentage point shy of its 52-week high, is trading 5.2% above its 50-day MA and 6.8% above its 200-day.
Unlike the previous stocks, JNJ stock is actually looking a bit stretched as far as relative strength is concerned. Still, an RSI of 66 remains below the overbought level of 70.
Johnson & Johnson looks more fitting among stocks to buy when you look at the Thomson Reuters Relative Strength Indicator, which gives JNJ stock a score of 67 — leaps and bounds better than the industry average of 44.
Meanwhile, April returns average about 3% for JNJ stock.
Click to EnlargeLike Johnson & Johnson, Microsoft (MSFT) stock is a Dow component that is having a terrific 2014. MSFT stock is up 6.4% for the year-to-date as the S&P 500 tries to stay afloat — with momentum for more gains in April.
While MSFT stock has pulled back a bit in the past few days, the stock still is trading about 4% above its 50-day MA, and is well above its 200-day MA, by 11.4%. There’s not much ceiling left for MSFT stock, either — should it reverse course, it only has about 4.5% to go before it resets the multiyear highs it reached at the beginning of the month.
MSFT stock also looks good on an RSI basis, at 53, plus is trumping its industry, according to the Thomson Reuters Relative Strength Indicator — there, MSFT scores a 56 out of 100 vs. an industry average of 44.
Lastly, MSFT is another blue-chip that loves April, with an average monthly return of 3.7% over the past 10 years.
As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.
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