How to go after money-doublers with every trade you make
- We’re all familiar with buy ratings from agencies like Standard & Poor’s, and we know they can be useful in selecting stocks for our portfolios. But technical analysis is the most accurate way to predict the direction of a stock, or the market for that matter.So I looked at stocks that S&P has a four- or five-star rating on and analyzed their charts to come up with six great technical trades for you.
Keep reading to find out about these top-rated stocks.
-
#1 Apache Corp. (APA)
How to go after money-doublers with every trade you makeThe U.S. dollar continues to show weakness, and oil will likely continue to be a good hedge against its further deterioration. Apache Corp. (APA), which is a large oil and natural gas exploration and production company, should continue to benefit from the dollar’s fall.
APA fell from almost $150 in May 2008, to $51 in March. Energy prices improved, and so did this stock as it built a base on a double cup-and-handle formation. In September, a major breakout from the handle took the stock above $95 on very high volume.
The target for the breakout is about $130, but long-term holders may very well see new all-time highs for the stock. S&P ranks Apache as a strong buy (five stars).
-
#2 AT&T (T)
How to go after money-doublers with every trade you makeAT&T (T) fell from a high of almost $43 to less than $22 in a little over a year. T formed a long-term bottom, finally breaking out at $27 after executing a gold cross (confirmation of a long-term bull market).
But profit-taking in the past two weeks has caused a retrenchment back to support at $26.50. The stock could pull back more, but its high quality and visibility make this the bluest of the blue chips, with a dividend yield of more than 6% and a strong buy recommendation by S&P (five stars).
The 12-month chart target is $32, but expect to see even higher prices longer term.
-
#3 Avnet Inc. (AVT)
How to go after money-doublers with every trade you makeAvnet Inc. (AVT) is one of the largest distributors of semiconductors and computer-related products in the world.
After falling from more than $40 in 2007, its common stock bottomed in October 2008, well before the bear market low in March. Since then, it has been trading in a bull channel with a top around $29 and low at $23.
The long-term trend of this favored blue chip is up, but recent profit-taking has driven it below $25 and could even result in a test of the support line at $23. S&P rates this stock as a strong buy (five stars) with a price objective of $33. From a technical standpoint, the chart’s objective is also $33. Buy AVT on a pullback.
-
#4 Bank of America (BAC)
How to go after money-doublers with every trade you makeBank of America (BAC) traded above $50 a share in December 2006, but the international financial crisis drove the sector to extreme lows, and BAC fell to below $3 in March. With the crisis abated and recent management changes to take effect at the end of this year, BAC has picked up positive research opinions from many analysts.
Technically the stock has made a solid advance along its bullish support line and the 50-day moving average. A recent buy signal from our internal Collins-Bollinger Reversal (CBR) indicator, along with a Moving Average Convergence/Divergence (MACD) buy signal, could result in a breakout and a run to the technical target of $25. S&P has a “strong buy” (five stars) recommendation on BAC.
Check out OptionsZone’s Technical Analysis 101 section.
-
#5 SPDR S&P Homebuilders ETF (XHB)
How to go after money-doublers with every trade you makeThe SPDR S&P Homebuilders ETF (XHB) bottomed in March and made a direct run to the 200-day moving average by the end of April. In mid-July, it executed a gold cross, which indicated that its long-term trend was about to change. By early August, it had broken the high of July, establishing an uptrend.
Since then it has been trading within a bull channel, but recently broke the 50-day moving average (blue line) suggesting that XHB will head for the support line and 200-day moving average at around $12.50.
For those who think that the economy is turning, the homebuilders may be a good long-term investment, since prior to the economic crisis XHB traded above $40 and should participate in a new recovery.
Take our Technical Analysis IQ Test.
-
#6 Dollar Tree (DLTR)
How to go after money-doublers with every trade you makeDollar Tree (DLTR) has more than 3,500 stores that sell its inventory of toys, durable housewares, candy, seasonal goods, etc., for $1. Its other stores, operating as Deal$, sell most of its inventory at $5 or less.
This deep-discount retailer is generally considered to be the leader of its class and is rated a “buy” (four stars) by S&P with a target of $59.
The stock executed a major long-term bullish breakout at around $45. Technically this breakout is major and targets the stock at over $65.
