Some believe every dog has its day. But when it comes to investing in some of 2019’s more doggish blue-chips, select Dow stocks are ready to pay big-time dividends to investors in more than one way in 2020. Let me explain.
It has been a merrier investing season for investors this year following 2018’s corrective bag of coal that weighed so heavily on Wall Street’s animal spirits. For its part, the benchmark Dow Jones Industrials cruised to all-time-highs and a gain of nearly 2% this month on the back of a Santa Claus rally. The price action has also extended the Dow’s year-to-date return to an unusually strong 22%.
Bullish participation among individual blue-chips has been solid. But Apple (NASDAQ:AAPL) takes the cake in price performance. The market’s largest publicly-traded company has made it a December to remember with its gain of 8% and year-to-date rally of over 84%. Still, there are other Dow stocks that investors should be even more excited about right now.
As we head into 2020, rotations among sectors and stocks are nearly inevitable and potentially highly-profitable situations. Having said that, one place to look are blue-chips which have behaved somewhat doggishly this year, while putting in solid technical work to increase the odds of outperformance among Dow stocks in 2020.
Bottom-line, if you missed this year’s big winner, Microsoft’s (NASDAQ:MSFT) gain of 56%, or happily happen to be sitting on big-time profits with less margin for error, celebrate the New Year in Dow stocks ready for technical leadership and that offer healthy dividends to boot.
Cisco (CSCO)
Source: Charts by TradingView
Cisco (NASDAQ:CSCO) is the first of our Dow stocks to buy. The blue-chip stock has under-performed the benchmark index by roughly 12% in 2019 with a gain of about 10.5%. But the New Year is setting up to pay big-time dividends in the form of price performance that’s sure to delight investors on top of the company’s fat dividend of nearly 3%.
Technically, shares are shaping up to establish a monthly bottoming candlestick within a key longer-term support zone comprised of price congestion, Fibonacci, and trendline analysis. As CSCO’s correction has also maintained this Dow stock’s uptrend and stochastics are just now forming a bullish crossover in oversold territory, buying on weakness looks even more compelling.
CSCO Stock Strategy: The recommendation in Cisco is to buy shares in January on price confirmation December is a bottoming candlestick. Set a stop-loss beneath the pattern low and look for this Dow stock to challenge its 2000 high of $63.94 for taking initial profits.
Caterpillar (CAT)
Source: Charts by TradingView
Caterpillar (NYSE:CAT) is the next of our Dow stocks to buy. No doubt it’s been a tough couple years for CAT stock investors. But now there’s more than just dividend relief of approximately 2.8% to take the sting out of holding this blue-chip investment.
Technically, CAT’s weakness since 2018 has produced a high-level double-bottom consolidation pattern. With the corrective lows successfully testing the 50% Fibonacci level and remaining above the Dow stock’s lengthy basing pattern from 2011 – 2017, there’s strong pattern evidence in place for Caterpillar to trade aggressively higher in 2020.
CAT Stock Strategy: For this Dow stock, shares can be purchased right now. CAT stock affirmed its bottom with a breakout last month through the pattern’s April mid-pivot of $142.54. Now and with Caterpillar just 4% higher and stochastics quickly confirming the bullish price movement, there’s no time like the present to go long.
I’d recommend a stop-loss beneath $137, which looks like sufficient leeway off and on the price chart. On a rally, given the size of CAT’s consolidation work, I’d allow a breakout to new highs take this Dow stock towards $200 before reducing exposure and locking in profits.
Chevron (CVX)
Source: Charts by TradingView
Chevron (NYSE:CVX) is the last of our Dow stocks to buy. The energy giant’s 3.95% dividend puts shares firmly on the radar of income investors who follow the Dogs of the Dow buying strategy. But it’s CVX stock’s healthy base-on-base pattern within an uptrend that’s caught our eye.
After two failed monthly breakout attempts (highlighted in yellow) followed by a successful test of the prior cup’s highs, a third try with stochastics leading the way looks promising for bullish follow-thru in 2020 for CVX stock.
CVX Stock Strategy: Buy this Dow stock on a breakout above the July high of $124.48. A stop-loss below $117 or 6% risk looks approachable both off and on the price chart. Likewise, I’d allow profits to run in CVX stock towards $150 before reducing position size.
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
