The broader market is on the verge of a decline but more is needed to stop the decline, Oppenheimer says.
S&P 500 (SP500) (NYSEARCA: SPY) closed above the 200-day moving average last week for the first time since April.
“Overall, we believe the fundamentals of the S&P are not good, and if the final breakout occurs now or in the future, we expect the broadest list of stocks to be at a higher price when the breakout occurs,” analyst Ari Wald wrote in a note. “On the trading side, we see 4,028 (Nov. Peak) as the beginning of support followed by 3,920 (100-day average), and 4,100 as resistance (2022 downtrend).”
Wald identified eight stocks that his OPCO Trifecta strategy of stocks rated Outperform, showing good performance and supported by high trends.
- Chipotle (CMG) – “Power in the consumer movement.”
- Etsy (ETSY) – “The strongest of the lowest-priced companies.”
- Apollo Global (APO) – “Power in the capital markets.”
- Morgan Stanley (MS) – Power in capital markets.”
- Enphase Energy (ENPH) – “The best in solar and renewables are ready for a renaissance.”
- Arcosa (ACA) – “Power in big things.”
- Paycom Software (PAYC) – “The strongest in a low-cost industry.”
- Texas Instruments (TXN) – “The most powerful in the most undervalued industry.”
Oppenheimer also downgraded Utilities (XLU) to Underweight from Market Weight, following its disappointing headline on the security.
“In terms of price, the SPDR (XLU) tracking has reached $71 resistance which shows the 200-day close and the February 2020 peak which appears to be neutral,” said Wald. “Participation in this sector is our main concern.”
“Compared to the S&P 500, XLU shows a slight decline in its 2020 close below its 2000 low, and its lowest multi-year low since 2009.”
The charts show trading signals in four stocks that continue to resist after the crash: Duke Energy (DUK), Xcel Energy (XEL), Eversource Energy (ES) and Alliant Energy (LNT).
From a fundamental perspective, Morgan Stanley says now is the time to disrupt the bear market.