Even the biggest of market bulls are apparently not collectively immune to catching a bearish bug. But if you think that hints of a pandemic situation for investors, think again. It’s a better time to look past the headlines, and focus on these three market-busting contrarian stocks ripe for a comeback on Wall Street.
Let me explain.
Following the President’s Day closure for U.S. financial markets, it was the world’s largest publicly-traded company’s turn to rain on Wall Street’s bullishly-defying parade of ever higher prices. Shares of tech giant Apple (NASDAQ:AAPL) weighed on sentiment and prices Tuesday following a current quarter sales warning tied to the coronavirus.
For its part and despite rallying well off its intraday lows, AAPL still finished down 1.83% — while the large-cap, broad-based S&P 500 dipped by a modestly sympathetic 0.06%. Could this be the last straw for Wall Street’s bull market? Possibly.
Moreover, in a market made up of stocks, three badly beaten-down contrarian stocks are ready to enjoy absolute returns; Even if other stocks investors are universally sweet on begin to sour.
So, let’s dive in.
Contrarian Stocks to Buy: Pinterest (PINS)
Visual-discovery and sharing platform Pinterest (NYSE:PINS) is the first of our contrarian stocks to buy. Since coming public last spring, shares have put together a volatile price chart for bulls and bears. In the end though, the wild price action favored the latter camp in 2019.
Last year, shares finished off are 50% below their highs. Furthermore, PINS stock ended 2019 roughly 20% beneath Pinterest’s opening secondary market print and nearly 2% in the red versus the stock’s initial public offering price of $19.
It was ugly to say the least for those that stayed the course. The good news, though, is that there’s growing evidence a meaningful low is close at hand for this contrarian stock.
After bottoming in December, Pinterest has rallied strongly — and the contrarian stock now looks close to establishing an uptrend. Moreover, the most recent pivot high was formed on a bullish earnings beat, which delivered solid sales growth. Now, a multi-day pullback has filled in the price gap as shares test a support zone backed by Fibonacci and last April’s opening day low.
Pinterest Stock Strategy: Buy PINS stock inside the support zone, which stretches from approximately $21 to $23. On a daily chart indication, a confirmed fresh pivot low is in place. I’d recommend using a stop-loss marginally beneath the support area at $20.70, if required. Likewise, taking partial profits on a test of zone resistance and recent high near $27 makes sense off and on the Pinterest price chart.
Gilead Sciences (NASDAQ:GILD) is the next of our contrarian stocks to buy. The large-cap biotech has been out of favor for a few years, with price weakness tied to past drug pricing failures and seeing its once-dominant hepatitis C market share decline.
However, the upside of Wall Street’s bearishness is that Gilead shares are now dirt cheap relative to its S&P 500 peers and sport an attractive 4% dividend.
Furthermore, the price chart is also in agreement that now is the time to take the other side of today’s investor pessimism. Since forming a Fibonacci-supported double-bottom pivot in December 2018, Gilead shares have established a symmetrical triangle built over 14 months. This month’s announced sales beat for the company resulted in the contrarian stock breaking above pattern resistance before settling back into a test of the triangle for support.
Overall, the price action appears bullish while skewing the risk profile heavily in favor of buying shares today.
Gilead Stock Strategy: I’d suggest buying this contrarian stock right now and setting a stop at $63.70. The exit contains risk to about 5% and only closes the position if Gilead’s February low and the pattern’s apex line fail. On the upside, $78 to $83.50 looks about right for profit-taking as shares challenge Fibonacci resistance and GILD’s 2018 high.
Stratasys (NASDAQ:SSYS) is the next of our contrarian stock buys. Along with peer 3D Systems (NYSE:DDD), SSYS was one of the market’s most dearly loved growth names in 2013. This recognition came due to the company’s printing technologies receiving the stamp of approval from Wall Street’s sell side.
Unsurprisingly, the adulation didn’t end well. Shares of Stratasys are down 85% from a January 2014 high of $138.10. More important, this contrarian stock is now in position to be purchased.
Technically, shares of Stratasys have traded down the past several months into a test of a long-standing channel support line. With an oversold stochastics crossover confirming a low in-the-making, SSYS is in position to print money for bullish investors.
Stratasys Stock Strategy: For naked purchases, I’d suggest buying this contrarian stock after next Wednesday’s earnings release if investors would like a bit more price confirmation. Alternatively, and given Stratasys stock’s history of volatile earnings moves, using a married put or long call strategy which offer defined risk and unlimited upside potential looks about right in today’s market.
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.