The market has been following the typical seasonality trends to a “T” this year as the S&P 500 Index and other major indices are experiencing selling pressure, despite trading near all-time highs.
The reason for the seasonal weakness is fairly simple to understand as the summer months translate into lighter volume trading that typically increases volatility, making the average investor nervous. This is something that all investors should be getting used to as the trend continues into September, which is often the most volatile month of the year.
Despite the weakness and volatility, there are a handful of large-cap stocks that are breaking into new bull market trends. That’s right, some of the largest companies in the S&P 500 and the Dow Jones Industrial Average are actually coming back to life after months of lagging the rest of the market.
The term, there’s always a bull market somewhere applies very well to these names as they are in the initial phases of newly formed bullish trends. This means investors can grab these stocks as they strengthen through the summer instead of weakening, like the rest of the market is doing.
Let’s take a look at three blue-chip stocks to buy:
Blue-Chip Stocks to Buy: Bristol-Myers Squibb Co (BMY)
Pharmaceutical companies have spent a long time trading in downtrends thanks to the uncertainty that surrounded last year’s elections and the potential for reform in the healthcare industry.
Alas, that cloud of uncertainty is beginning to lift as the market is getting used to the idea that regulatory change, if any, will be much less than originally expected. This puts many the pharmaceutical names like Bristol-Myers Squibb Co (NYSE:BMY) back in play as they recover.
Shares of BMY are among the chosen as the stock is in the process of moving above its 20-month moving average. This trendline is the technical measurement for a bull market.
The analysts following the stock have been sitting on the sidelines as the current analyst ratings show more than 50% rating Bristol-Myers Squibb stock as a hold or lower. This is something that will change over the next few months as they start to jump on the bullish bandwagon.
Our models suggest that BMY shares are headed to a target of $67.50 with their renewed bull market trend.
Blue-Chip Stocks to Buy: Gap Inc (GPS)
Brick and mortar retail companies are coming back as they adjust to the online world and consumers get back into the spending mood with an improving economy.
Gap Inc (NYSE:GPS) had been the posterchild for beaten down retail as they fell behind with their flagship stores; however, the other brands under Gap’s flag are now bringing things back around.
The fundamental strength is leading to a newly formed bullish trend with GPS shares finally breaking back above their 20-month moving average. This puts them officially into a bull market again as the 20-month is also beginning to trend higher.
Our model identifies Gap as a bullish prospect also because of the pessimistic sentiment towards the stock. Currently, more than 6 times the average daily volume is held as short positions. This indicates that a short squeeze is imminent.
Additionally, analyst recommendation for GPS stock is heavily weighted in the hold and sell categories. This indicates that upgrades are likely as Gap continues to move into its bull market trend.
Our model currently identifies a target of $28 over the next three to six months for GPS shares.
Blue-Chip Stocks to Buy: Verizon Communications (VZ)
Verizon Communications Inc. (NYSE:VZ) and AT&T Inc. (NYSE:T) have taken a beating as investors got away from communication stocks at the same time that dividend yielding investments became less attractive due to the expectations of higher interest rates.
Now, with interest rates leveling and VZ’s fundamentals improving, the stock is moving back into a bull market after spending five months in “bear mode”. The move above the 20-month moving average signals this trend change, which will begin to attract more traders over the slow summer months.
Over the short-term, VZ stock just reversed the trend of its intermediate-term trendlines like the 50- and 200-day moving averages after providing a better-than-expected earnings report last month. This has added to the buying volume, aiding in the shift back to a bull run.
Last year, analysts flooded out of Verizon stock as they downgraded it from a buy to hold. Currently, only 24% of the analyst tracking the stock have it ranked a buy. This means the stock has a nice “wall of worry” to climb higher.
Given the likelihood of upgrades and the improving technical trends, our models target a price of $53 over the next three to six months.
As of this writing, Johnson Research Group did not hold a position in any of the aforementioned securities.
