Wall Street is breathing easier today. But given that it is October and the art of deal-making is far from certain these days, investors can tread more confidently if they choose income-generating, blue-chip stocks that are well-positioned for winning the trade war. Let me explain.
The Dow Jones Industrial Average is nearly through the first half of October — a month notorious for spooking investors — and so far a market correction still hasn’t happened. That’s not to say the period hasn’t been without incident or that a correction won’t make an appearance this year. The fact is elevated volatility, back-and-forth political intrigue and mixed economic data offering jeers and cheers have been a staple on Wall Street this month. Nevertheless, a pullback which saw blue-chip stocks lose as much as 4.25% in early October has been completely retraced as of Friday’s intraday trade.
So, where exactly does that leave investors, other than a flat October, which may feel like a victory?
Given that deal-making hasn’t been a proven hallmark of U.S. President Donald Trump, I’m not holding my breath that today’s market optimism for a partial trade deal with China won’t be derailed by a tweet or temper tantrum. Of course, something else out of left field or maybe the continued saga of Donald and the Giant Impeach could always find Wall Street pulling up its bootstraps and getting defensive again.
With all of that said, I’m recommending investors stick with blue-chip stocks. Risk-assets of this caliber have prevailed over bear markets, weathered all sorts of political theater and will pay investors for their patience. And right now three of these names also enjoy negotiating power for bulls on the price charts.
Blue-Chip Stocks to Buy: Disney (DIS)
Disney (NYSE:DIS) is the first of the blue-chip stocks to buy. The diversified entertainment giant hit all-time-highs in late July fueled by a breakout from a near three-year long triangle pattern.
Shares of this blue-chip pay investors a below-market dividend of 1.36%. That’s nothing to write home about, but it’s a little something for your time. Moreover, DIS stock offers investors nice prospects for continued growth. And my guess is Disney’s deeper move into the streaming market with Disney+ later this year and against the likes of Netflix (NASDAQ:NFLX), Amazon (NASDAQ:AMZN) and Apple (NASDAQ:AAPL), will prove to be the company’s newest stock booster.
With an oversold DIS stock pulling back to test its 40-week simple moving average, lower Bollinger Band and 50% retracement level in an inside doji bottoming pattern, this blue-chip stock is nearly ready to buy.
DIS Stock Strategy: My advice is to buy DIS stock on confirmation of the two-week candlestick bottoming pattern as shares trade through $131.78. I’d give this blue-chip stock a bit of wiggle room, but if shares fall below $126.50, exiting the position and keeping the powder dry for stronger opportunities makes sense.
Cisco Systems (CSCO)
Cisco Systems (NASDAQ:CSCO) is the next of our blue-chip stocks to buy. And you can thank Goldman Sachs for putting CSCO stock into a better position for buying. On Thursday, the investment firm warned Cisco’s enterprise revenues will weaken while its telecom spending will remain at depressed levels. Investors reacted by sending shares down 1.47%.
The combination in CSCO stock I’m looking at is much more upbeat. Today’s buyers can get into this blue-chip as it offers a 3% yield backed by price action that’s setting up a corrective double-bottom inside a very strong technical support zone.
CSCO Stock Strategy: My advice in this blue-chip stock is to buy shares next week if the hammer candlestick is confirmed above $48.13. All chips are off the table if the pattern fails and investors would be smart to exit or risk a much larger correction toward possibly $40 a share.
Not that I’ve saved the best for last, but AT&T (NYSE:T) is a blue-chip stock whose attractive income stream of 5.50%, relative strength and pattern on the price chart make it ripe for buying.
Shares are in position to stage a breakout from a tight multi-week consolidation that has found support from prior highs and above T stock’s cup-shaped base of nearly 2.5-years. Bullish investors might also see the current pattern as a “high” handle formation. Either way, the price action bodes well for a continued rally into 2020.
T Stock Strategy: The plan for buying this blue-chip stock is simple. Wait for T stock to trade above resistance and purchase shares through $38.22. And respect the pattern low for exiting if needed, as an even larger yield may not be worth the trouble.
Disclosure: Investment accounts under Christopher Tyler’s management do not currently own positions in securities mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.