The market has gone absolutely nowhere over the course of 2015 and, with the exception of the August correction, low volatility has been the prevailing theme for the past year.
With the Federal Open Market Committee preparing to broadcast its latest policy announcement to the market next week — in which it is likely to increase interest rates after seven years of keeping them near zero — things could heat up quickly.
So that you’re poised to take advantage of the big market moves ahead, I’m sharing five stocks you’ll want to keep an eye on — directly from my Stock Watch List. The entire list is made up of about 500 stocks that I know inside out and backwards — that I’m handing over to investors along with a risk-free trial of my Momentum Options advisory at a massive 60% discount for a very short time!
To give you a taste of my latest trade ideas, here’s a peek at the following stocks I’m watching as we head into 2016 — four bullish and one bearish — because I believe they’ll play out favorably regardless of what the Fed decides.
So read on for this special preview of my massive Stock Watch List … then make sure to sign up at our lowest price ever!
Stocks to Watch: Intel Corporation (INTC)
Intel (INTC) reported earnings in October that beat analyst expectations. The company earned 64 cents per share on revenue of $14.5 billion for the third quarter. Prior to that, the company had matched or topped estimates in the previous four quarters by 5 cents, flat, 8 cents and a penny, respectively.
Forty-seven analysts were covering INTC stock at the time, with eight “strong buy” and 15 “buy” recommendations. Meanwhile, 17 of the suits-and-ties rated Intel a “hold,” five issued an “underperform” rating and two issued “sell” recommendations.
Intel shares made a nice run from the $30 level in early October to clear the 200-day moving average, and have appreciated over 9% since its last earnings announcement.
INTC stock has been holding the $34 level since mid-November, and a possible rebound and test to fresh highs could be in the works. Throw Intel into your list of stocks to watch now that it’s trying to break through $35. I’m targeting a run past $37 to a fresh 52-week peak into January.
Stocks to Watch: Cisco Systems, Inc. (CSCO)
Cisco (CSCO) released its latest earnings report in mid-November and, while the results came in above estimates for both EPS and revenue, the stock dropped on its report date.
Shares have been in a strong uptrend following August’s low, and the stock made a push toward its 52-week high in October. CSCO dropped below its 200-day moving average after releasing earnings, but the 50-day moving average is in a strong uptrend and recently formed a golden cross by pushing through the 200-day moving average.
Bullish traders could use December or January call options to play a possible run to $30 by the end of the year. Shares previously failed to clear resistance at $29.50, and a move above this level should lead to a run past $30 and 52-week highs.
Stocks to Watch: Visa Inc (V)
Financial stocks have been gaining strength recently despite mixed earnings results from companies in the sector. Visa (V) slightly beat earnings estimates of 62 cents per share on revenue of $3.6 billion when it reported in early November. The company had topped estimates by 15 cents, 2 cents and a penny (twice) during the previous four quarters, but more importantly, revenue also topped expectations in each of the last four announcements.
When the results came in, V stock gapped down from $78 to about $74.50, but shares reversed the entire move the following session and then went on to tap a new 52-week high of $81.01.
V has traded in a tight range between $81 and its $78 support level for the last two weeks, and if shares can clear the recent 52-week peak, Visa could make a run higher into blue-sky territory.
Stocks to Watch: Bank of America Corp (BAC)
Bank of America (BAC) shares are in a bullish setup, as a “golden cross” officially formed in late November when its 50-day moving average crossed above its 200-day moving average.
I have BAC January expiration calls on my watch list to play a move past $18 and possibly to $20 by mid-January.
With the Federal Reserve likely to raise interest rates next week, I believe the market could rally on a rate hike. Fed Chair Janet Yellen said the process of rate increases would be gradual, although she failed to specify what gradual means in terms of specific timing. Most of the suits-and-ties have said that the market will tumble once the Fed starts to raise rates, but I have been saying that the financial stocks, including BAC, need to lead the next rally to higher highs.
Wall Street has penciled in a nearly 80% chance that the Fed will raise rates this month, and a 50% chance for a second rate hike by March. Looking even further out, the median forecast for the fed funds rate for mid-2016 is 0.75%, and it is 1.125% for the end of next year.
The Fed has been reluctant to tighten policy twice this year, in June and September, so the possibility that it will keep rates unchanged does exist. Odds greatly favor a rate increase, but there still is a chance that the Fed will stand pat. If it elects not to increase rates, I would imagine a selloff would follow, as the market would likely be disappointed by the continued uncertainty.
Stocks to Watch: SPDR Gold Shares (GLD) (Short)
The suits-and-ties continue to talk about buying gold as “protection,” but I have said previously that the yellow metal could tumble below $1,000 an ounce this year.
A long-term monthly chart for gold shows risk to the $900-$800 area, which is where I would possibly start initiating a position. Investors can buy gold coins from a variety of dealers, but it is important to be careful of the “spot” prices or the handling fees they charge.
As far as paper-trading the yellow metal, option traders could play a continued pullback in the SPDR Gold Shares (GLD) by going long puts with December, January or even March expirations.
The December options have less than two weeks until expiration, so they would need to be traded carefully. January expiration options would allow a possible trade more time to play out, but I’m a little cautious about this time frame as well.
However, open interest continues to grow for the March contracts, and the risk/reward ratio for a potential trade looks great. These options provide more than four months of time premium to play a possible drop to the low $90s on GLD shares, and they would be less susceptible to a downturn should GLD reverse course.
While no one can say for sure what will come out of the next Fed meeting, we will not have to wait long to find out. Next week’s action will tell us whether we’re headed for Dow 19,000 or Dow 16,000. Either the market likes what it hears from Yellen & Co., the VIX gets back under 15 and the market explodes to new highs …
Or the market panics about rising rates, the VIX breaks above 20 and the markets crash through key support levels in a hurry.
My subscribers and I are prepared for whatever the market throws at us, as I have a ton of options — both calls and puts — on my Stock Watch List to play the next major trend.