It was a terrific Turnaround Tuesday for the Dow Jones Industrials and other indices yesterday and continuing today. But during a historic correction-turned-bear-market, can the price action be trusted? Let’s examine the nuts and bolts of the rally, the keys to moving successfully higher and three of the best big-name stocks to buy — or at least keep on your watch list.
The Dow Jones Industrials surged 11% higher Tuesday driven by positive indications that lawmakers were inching ever-closer to a fiscal stimulus package to help American families and businesses battle the economic impact of the coronavirus. And overnight, confirmation of the historic $2 trillion deal was in fact received. So, it must be time to pull the trigger on select stocks, right?
In Wednesday’s early going, investors have continued to celebrate. But gains in the bellwether average may be more like the last drunken festivities in front of a likely hangover. Maybe worse, the cumulative price action could be nothing more than a dead cat bounce — albeit the nastiest clawing the bears have faced since the financial crisis more than 11 years ago.
Still, all bull markets must start somewhere. And Monday’s numbingly significant lows are a solid starting point for that more positive outcome. Now all that’s needed, figuratively and literally, is a high-powered market-based follow-through day or in the next few sessions. Investors will also need a list of stocks to buy that should do better than just keeping up with the Jones’.
Stocks to Buy: Microsoft (MSFT)
Source: Charts by TradingView
Microsoft (NASDAQ:MSFT) is the first of our stocks to buy. The tech heavyweight hasn’t proven immune to the ravages of the bear market. But make no mistake, MSFT stock is still a leader off and on the price chart.
Technically, shares of Microsoft are shaping up as a solid opportunity to buy on weakness. The sell-off of the past few weeks has allowed MSFT to test a key support area from roughly $120-$132. The price zone is backed by three Fibonacci layers and the stock’s longstanding trend-line dating back to the financial crisis.
With it demonstrating relative strength by staying well above 2018’s broader market corrective low, sporting an oversold bullish stochastics crossover and having formed an engulfing bullish candlestick, MSFT stock is rightfully a name to watch for nearby purchases.
Cisco (CSCO)
Source: Charts by TradingView
Cisco Systems (NASDAQ:CSCO) is the next of our picks. According to a recent analyst note from Jeffries, the network communications play is a stock you can be proud of “practically stealing.” The recommendation is based on CSCO stock’s quality fundamentals amid investors indiscriminate selling. What’s more, the price chart is in agreement on this one as well.
Technically, Cisco has retraced more than 50% of its rally from the lows of the financial crisis. The cheaper share price also looks infinitely more valuable on the price chart, with the monthly chart showing a nearly fully-formed bullish hammer candlestick and stochastics inside oversold territory.
General Electric (GE)
Source: Charts by TradingView
Make no mistake. This isn’t your dad’s or granddad’s stock market. And shares of General Electric (NYSE:GE), our last stock to buy, should have an asterisk next to them. The once mighty blue-chip is a turnaround play these days. But with CEO Larry Culp at the helm, the still-large industrial is moving its businesses in the right direction.
On the price chart, GE stock is looking every bit like a true turnaround play. Technically, it has put together a confirmed double-bottom pattern not far removed from General Electric’s 2009 historic low. And with shares also showing an oversold bullish stochastics crossover setup, a market follow-through day should bring very good things to life for investors.
Investment accounts under Christopher Tyler’s management do not currently own positions in any 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.
