Stocks have recovered from Wednesday’s Trump-related wipeout as chatter of impeachment fade. As a reminder, the political media had a field day over reports President Trump had asked former FBI director James Comey to end an investigation into former National Security Advisor Michael Flynn’s alleged connections to Russia and Turkey.
With the Department of Justice appointing a special council to look into the matter, and with Trump off on his first foreign trip as president, cooler heads are prevailing. The catalyst for the original wipeout, concern that Trump’s pro-growth legislative agenda will be stalled, still hangs in the air however. Especially as new allegations come to light.
While the medium-term outlook still looks dicey — with technical measures rolling over, breadth still narrowing and fundamentals like economic growth uneven and tepid — we could be on the cusp of a short-lived relief rally over the next week or two.
With that in mind, here are three Dow Jones Industrial Average components that look set to benefit:
Dow Jones Stocks to Buy: American Express (AXP)
American Express Company (NYSE:AXP) shares are bouncing off of support near $76 from their mid-April low, setting up a run back to the upper end of its five-month consolidation range near $82. That would be worth a near 8% gain from current levels.
Shares surged in late April thanks to a better-than-expected quarterly report and an upgrade from analysts at Guggenheim and RBC. Earnings of $1.34 per share came in seven cents ahead of estimates despite a 2.5% drop in revenue, easing profitability concerns amid rising competitive pressure.
What’s more, American Express is expected to perform twice as well over the long term as it has in its previous five years, and any signs of outperformance could sway more analysts from “hold” to “buy” ratings.
Dow Jones Stocks to Buy: Chevron (CXV)
Chevron Corporation (NYSE:CVX) shares are coiling up, inching above their 50-day and 200-day moving averages, and look ready for an upside breakout out of a long six-month downtrend.
The decline from the December high nearly reversed the post-election surge the company enjoyed, giving value hunters an attractive entry point for a possible retest of the $116 level — which would be worth a 9%-plus gain from current levels.
Chevron’s long-term prospects look great, with analysts expecting 76% growth versus a 39% contraction in its previous five years. Shares are moving as anticipation builds for an upcoming meeting of OPEC oil producers and a possible extension of last year’s supply freeze agreement.
Dow Jones Stocks to Buy: Goldman Sachs (GS)
Goldman Sachs Group Inc (NYSE:GS) shares are testing critical support near $215, the lower end of a tight three-month consolidation range, which in turn marks the bottom of a floppy head-and-shoulders reversal pattern going back to December.
A breakdown here would trade a decline to the $190 range; but a rebound off of support here should be worth a run at the 50-day moving average for a gain of around 6% from current levels.
Shares gained more than 40% following President Trump’s surprise electoral win on hopes higher long-term interest rates, faster economic growth, and higher inflation would boost financial sector profits by widening net interest margins. Now that GS stock has wobbled in light of a largely headline-induced move (on the face of it), GS stock looks like a bargain with double-digit long-term growth on tap.
Anthony Mirhaydari is founder of the Edge (ETFs) and Edge Pro (Options) investment advisory newsletters. A two-week and four-week free trial offer has been extended to Investorplace readers. Redeem by clicking the links above.