From bailing on risk assets like there’s no tomorrow to making hay in a gravity-defying market, it has been an interesting 2020. Three months after an infamous bottom, with the second half of the year looming, what’s next for investors? For the following three large-capitalization stocks to trade, the forecast comes down to what’s happening on the price charts.
The market is in profit-taking mode — or more colorfully, pooping on itself — on Wednesday. Intraday, the broad-based, large-cap S&P 500 is off over 2.5%. Top constituents Apple (NASDAQ:AAPL) and Microsoft (NASDAQ:MSFT) are faring a bit better, losing 1.6% and 2.2% respectively.
So, what gives? Wall Street is growing nauseous once again over the growing threat of a second wave of Covid-19 (or a still-unfinished first wave) putting the U.S.’ economic reopening and recovery efforts at risk. Specifically, investors are reacting to news of the coronavirus ramping up in Florida, where a one-day record 5,500 new positive cases have been announced. It puts one of the country’s more reckless “shelter-in-place” state’s total number of cases at more than 109,000 and raised the positivity rate among people tested from around 11% to nearly 16%.
But aren’t AAPL, MSFT and many other large-cap stocks like Tesla (NASDAQ:TSLA), Home Depot (NYSE:HD), T-Mobile (NASDAQ:TMUS) and Amazon (NASDAQ:AMZN) immune to Covid-19? To be sure, since the S&P 500 bottomed on March 23, those companies have proven more than just resilient. In fact, all have gone on to new highs and enjoyed returns that have allowed for lesser — but nevertheless history-making — gains in the index.
Still, big names like JPMorgan (NYSE:JPM), Starbucks (NASDAQ:SBUX), IBM (NYSE:IBM), Delta (NYSE:DAL) and others also serve proof that large-cap stocks are simply companies in a market made up of stocks, and whose shares can go up and down.
In the following, let’s explore a bit of that idea with three large-cap stocks well-positioned to continue doing what most stocks do best on their price charts and how to better exploit that behavior.
Large-Cap Stocks to Trade: Qualcomm (QCOM)
Source: Charts by TradingView
The first of our large-cap stocks to trade is Qualcomm. The tech giant’s shares look well-positioned for new all-time highs in the weeks and months ahead. After a couple years of sometimes-volatile price action, QCOM stock’s multi-decade uptrend appears to be gaining conviction as new highs have been established.
The arrows on the provided monthly chart back buying this stock, whose support is building among investors. Coupled with a bullish stochastics crossover in neutral territory and cup-with-handle pattern that has formed over 2020, this is a stock to buy on a breakout.
Buy QCOM on a breakout of the handle above $92.14 in anticipation an increasingly good-looking trend in motion.
Tyson Foods (TSN)
Source: Charts by TradingView
Tyson Foods is the next of our large-cap stocks to trade. Counter to Qualcomm’s improved technical tone, the meats and prepared foods giant’s shares are showing signs of illness. Blame it on the coronavirus. Many already have — and maybe for very good reasons, due to health and public safety concerns raised during the pandemic.
Technically and as the monthly chart of TSN shows, shares are putting together the finishing touches on a bearish hangman candlestick formed this month. With the pattern forming in between two previously broken uptrend lines, the writing looks to be on the wall for this large-cap stock.
Short shares of TSN stock on a bearish confirmation signal. Currently that’s the June low of $57.75. Keep watch, as the trade could come as early as next Thursday. And what would be a less celebratory “First of July” for bulls?
Spotify (SPOT)
Source: Charts by TradingView
The last of our three large-cap stocks to trade is Spotify. The world’s largest streaming music platform topped the charts last week — or rather busted a move to new all-time-highs — after signing a superheroes podcast deal with AT&T’s (NYSE:T) Warner Bros and DC Entertainment units.
Technically, the positive reaction by Wall Street has a lot working its favor. The price action also signaled a breakout from a super-healthy-looking two-year-long triple bottom base. Based on the pattern’s size, I’d forecast a move towards $285-$300 is possible during the second half of 2020.
To be fair, no stock is fully immune to the coronavirus if conditions become really, really ugly for the planet. And that goes for SPOT shares as well. As such, currently I’d suggest buying SPOT on weakness and within the framework of a pullback. And if investors want protection that could make even Wonder Woman blush, using a hedged stock or all-options bull call spread are truly super positions to consider.
Investment accounts under Christopher Tyler’s management does not own 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.
