“Buy what you know” is a well-worn saying in the investing world for a reason…but it’s really just a starting point.
True, there’s a certain peace of mind that comes with buying a stock that’s popular with institutions and ordinary investors alike…especially if it also happens to have a solid dividend history.
But with any stock, timing is everything — and that’s where technical analysis can be a huge asset.
Here are the five Most Followed Instruments by subscribers to the Profit Scanner powered by Recognia, as well as the current technical picture for each.
Apple Inc. (NASDAQ:AAPL)
It should come as no surprise that Apple Inc. (NASDAQ:AAPL) is among the most watched stocks by Profit Scanner users.
Apple stock just enjoyed a bullish headline from RBC Capital Markets, whose analysts raised their AAPL price target on Mar. 31 — but that day’s broad market sell-off triggered some short-term bearish signals for AAPL shares.
Tuesday’s session saw a bearish Triple Moving Average Crossover for AAPL in which the four-day moving average crossed below the nine-day moving average, which in turn crossed below the 18-day moving average.
Moving averages are generally helpful as a way for traders to look past intraday volatility and identify an underlying trend…and, in this case, the implication is that AAPL is in a downtrend for those particular time periods.
Also on Mar. 31, AAPL stock crossed below its 21-day moving average, and its short-term Momentum indicator turned bearish, lending further support to its short-term bearish outlook.
Now, there is a bullish event in play as well: Apple’s intermediate-term “Know Sure Thing” (KST) oscillator turned bullish on Mar. 20 and remains so. This implies that, looking past the immediate term, momentum for AAPL is still bullish overall.
With all of this in mind, the technicals lend support to two potential courses of action for AAPL traders: A) a quick short trade (or put option trade), and B) using the short-term weakness as a buying opportunity for a longer-term play.
Bank of America Corp (NYSE:BAC)
Bank of America Corp (NYSE:BAC) is next on Profit Scanner’s list of Most Followed Instruments, and like AAPL, BAC has a mixed outlook depending on the time frame.
On Mar. 26, BAC shares suffered a bearish Double Moving Average crossover, when the stock’s 21-day moving average crossed below its 50-day moving average. In a Moving Average Crossover, it’s important to consider the time period covered by the moving averages in question; here, it’s a shorter-term bearish signal.
Then, on Mar. 30, Bank of America’s chart showed a long-term bullish signal: the bullish Continuation Diamond.
In the BAC chart above, you can see Bank of America stock making higher highs and lower lows in a broadening pattern at the start of the diamond…then the trading range gradually narrows after the highs peak and the lows start trending higher. The Continuation Diamond was confirmed when BAC stock broke above the boundary lines, implying that the uptrend is resuming for Bank of America.
From this pattern, the Profit Scanner expects Bank of America to reach a target range of $18.90 – $19.60 (or a 22% – 26% gain) in the next 313 trading days. So, while BAC has had enough short-term weakness to support a bearish trade in the near term, it looks like the best play over the long haul is a bullish one.
Facebook Inc (NASDAQ:FB)
Facebook Inc (NASDAQ:FB) had several longer-term bullish signals throughout March. For example, on Mar. 19, FB stock enjoyed an Upside Breakout with a long-term profit target of $89.50 – $91.25.
Then, on Mar. 20, Facebook saw a bullish Triple Moving Average Crossover involving the four-week, nine-week and 18-week moving averages, and FB’s MACD indicator turned bullish in the intermediate term.
The following week, however, there were a couple of bearish signals on Facebook’s chart. On Mar. 25, the Profit Scanner identified a bearish Engulfing Line, which suggested that selling pressure overwhelmed buying pressure and that the recent uptrend was due for a reversal.
The same day, FB’s Relative Strength Index (RSI) lent support to that idea, pointing to lower prices ahead as the stock recovers from overbought.
Mar. 26 brought two more, similar bearish signals, via the Fast Stochastic and the Commodity Channel Index. All of the bearish signals cover the short term.
So, those looking to ride FB higher to the Profit Scanner’s long-term profit targets may want to exercise caution until the stock recovers from overbought and from its bearish momentum.
General Electric Company (NYSE:GE)
Last but not least is General Electric Company (NYSE:GE), which also closed out March with a mixed outlook.
On Mar. 30, GE gapped higher (along with the broad market), and its Fast Stochastic indicator turned short-term bullish as the price rose from oversold. But the next day, GE crossed below its 50-day moving average amid a market sell-off.
In the chart below, you can see both the Moving Average Crossover and the fluctuation in the Fast Stochastic as GE stock’s closing prices (%K) moved above and below the moving average (%D):
In a choppy market like this one, there are bound to be plenty of down days that provide opportunities for bearish profits, or chances to “buy the dip.”
However, it’s important to get an idea of the technical “big picture” before acting — and, in General Electric’s case, conservative investors may want to stay away until GE stock’s clear of intermediate-term bearish events like the late-March Moving Average Crossover.
Profit Scanner powered by Recognia can help traders of all levels uncover these signals to determine the best timing to buy. Or use Profit Scanner’s technical insight to validate your own trading ideas. See how easy this powerful tool is to help you uncover hidden opportunities in the market.