- Despite the new highs in the major indices, this rally does not appear to be overbought and could go much higher. As we headed into 2010, all of
the major indices broke out above their recent tight trading patterns, and stocks are likely to follow through with much higher prices.The most significant breakout is the close above 1,120 on the S&P 500 (SPX),
because it represents a close above the 50%
retracement mark of the October 2007 to March 2009 bear market, and the recent breakout gives a new target of 1,245 for the S&P.This breakout is a major buy signal, and any profit-taking pullbacks should be used as an opportunity to load up on undervalued stocks. To get your
year started off right, I want to give you my top stocks to buy for January.
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Top Stock #1: Akamai Technologies Inc. (AKAM)
Internet applications and content provider Akamai Technologies Inc. (AKAM) broke
from an extended consolidation early in November at just under $24. The rise from its low of the year in August 2009 was characterized by a series
of textbook bullish flags, each break rising to new highs.Over and over, profit-taking brought prices back to support at the 20-day moving
average before buyers emerged to run the stock to new highs. This continues to be a very orderly, measured advance, which will most likely repeat
for some time.S&P has a “three-star hold” rating on S&P, but I am more optimistic. My technical target for a trade in AKAM is $32.
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Top Stock #2: Barrick Gold Corp. (ABX)
This acquirer, explorer and developer of gold properties and other metals, has pulled back from its 2009 high at over $48 and is stabilizing between
the 50- and 200-day moving averages.Barrick Gold Corp. (ABX) repeatedly rewarded traders in 2009, and
the recent correction in the stock gives us another opportunity to trade Barrick to at least $45.50. But longer-term investors may want
to hold onto this premier gold miner for another major advance. Note the recent buy signal from the stochastic indicator.Ford Equity Research rates ABX a “strong buy.”
Find out why gold is The
No. 1 Sector to Invest in for 2010.
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Top Stock #3: Cisco Systems (CSCO)
Until October 2009, Cisco Systems (CSCO) was appreciating at a very
fast clip, but the angle of attack was too sharp and, thus, subject to a correction. The correction drove CSCO below its 50-day moving average, but
the stock quickly stabilized into a sideways pattern, which is bouncing around the 20- and 50-day moving averages.This is still a very bullish chart with a price objective above $32. A new buy signal from our proprietary Collins-Bollinger Reversal (CBR) indicator
on high volume suggests that Cisco will move through the current
zone with little difficulty.Ford Equity Research rates CSCO a “strong buy.”
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Top Stock #4: Computer Sciences Corp. (CSC)
Computer Sciences Corp. (CSC) is an information technology company
that provides business process outsourcing and services to the commercial and government markets.The stock broke into a major uptrend in July following a gold cross in May. The stock has been hugging the 50-day moving average while regularly
making new highs, and the power of the advance is staggering as it cuts through the massive overhead accumulated from 2005 to 2007 with hardly a pause.The technical target for the massive July breakout is $65, but it could go much higher in 2010. S&P gives CSC its highest rating, a “five-star
strong buy.”
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Top Stock #5: Honeywell International Inc. (HON)
Honeywell International Inc. (HON) is a diversified technology and
manufacturing company that is the largest maker of cockpit controls, small jet engines and climate-control equipment.The stock tripled in price from late 2002 to early 2007, but in June 2008, it broke support and
plunged. By November 2009, HON was had fallen below $24.Since then, HON has established a solid “W” base and broken out from a compound cup-and-handle
formation. It is pending a buy signal from the stochastic indicator, which if made, could propel the stock to new highs.S&P rates HON a “five-star strong buy,” and my trading target for the stock is $50.
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Top Stock #6: MEMC Electronic Materials (WFR)
MEMC Electronic Materials (WFR), a designer and manufacturer of silicon
wafers for the semiconductor industry, looks as though it may have bottomed. This stock is the most speculative on my list of top picks for January,
but it could also provide the highest reward if its major double-bottom chart
pattern holds.WFR recently issued a buy signal from the stochastic and jumped through both the 20- and 50-day moving averages — both very strong indications
that the stock is headed higher.The stock is rated a “five-star strong buy” by S&P with a target of $17. My trading target is $17.50, but a longer-term target could be as high
at $40.
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Top Stock #7: Applied Materials Inc. (AMAT)
Applied Materials Inc. (AMAT), the world’s largest maker of wafer fabrication equipment for the semiconductor industry, is holding in a broad bull channel that began in November
below $8, with a top at $16.Several weeks ago, Standard & Poor’s chose Applied Materials as its “Stock of the Week,” with a 12-month target of $17 and a “five-star strong
buy” rating. However, the break from a pattern of tops drawn from July to December tells us that the high-volume buying will most likely continue.
Longer term, this may push the stock even higher than the trading target of $17.
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Top Stock #8: Textron Inc. (TXT)
Textron Inc. (TXT), an aerospace manufacturer of Cessna business
jets, Bell helicopters, and industrial equipment and components, appears to be breaking from a trading rectangle.Textron is in a powerful bull market with recent price action supported by both the 20- and 50-day moving averages, and a stochastic that recently
signaled a buy. All of this suggests that the resistance
line of the rectangle at $21 is about to be broken. If this was to occur, the target for the trade is $25.S&P rates TXT a “four-star buy” and also has a target of $25.
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