Where the bulls are: Ten U.S. large-cap stocks poised for a breakout

The Globe and Mail, Number Cruncher

By Gary Christie 

September 16th, 2019

In The Globe And Mail, Gary Christie uses Strategy Builder to search for U.S. large-cap stocks showing price momentum across multiple time frames.

What are we looking for?

U.S. large-cap stocks showing price momentum across multiple time frames.

We changed our view to bullish on the S&P 500 after the index broke above a short-term consolidation zone and key resistance at 2,950. The index also broke above its 50-day moving average, another bullish technical event.

In light of our bullish view of U.S. equity markets, we followed our top-down methodology and looked for large-cap stocks showing strong upward momentum in anticipation of a breakout to record highs in U.S. indexes.

The screen

We will be using Trading Central Strategy Builder to screen for U.S. large-cap stocks demonstrating strong upward price momentum. We will start by screening for U.S. stocks with a market capitalization of at least US$15-billion. This will limit our search to the largest and most stable companies in the market.

Next, we will search for stocks demonstrating price momentum across multiple time horizons. We will screen for a five-day price performance of more than 2 per cent, 13-week price performance greater than 10 per cent and a year-to-date performance of at least 20 per cent.

The current price-to-earnings ratio of the S&P 500 is at 19.6, therefore we want stocks at or below that level to keep valuations at a reasonable level relative to the market.

Finally, we were interested in stocks that are trading within 5 per cent of their 52-week highs because stocks making new highs usually continue to do so over the next six months because of strong price momentum.

More about Trading Central

Trading Central is a global leader in financial market research and investment analytics for retail online brokers and institutions. Trading Central’s product suite provides actionable trading ideas based on technical and fundamental research covering stocks, exchange-trade funds, indexes,
forex, options and commodities. 

What did we find?

Topping our list is telecom and media conglomerate AT&T Inc. The stock has just broken above its 200-week moving average, which is a strong bullish technical signal. Note also that AT&T has the highest dividend yield on our list, at 5.3 per cent. The company has been in financial headlines recently after activist investment firm Elliot Management Corp. disclosed an investment of US$3.2-billion in the company. While Elliot Management called for strategic changes identified in a four-step plan, the firm expressed deep conviction in the value of AT&T’s future, which has helped to propel the stock higher this week.

The stock with the largest market cap on our list is tech giant Apple Inc., which has seen an impressive price gain of 41.7 per cent year-to-date. With a P/E of 19 and momentum on the upside, the stock is on its way to test October highs. This week the company showcased the new iPhone 11 Pro and other devices, as well as TV+, its new video-streaming service that will be offered at a lower monthly subscription fee than competitors such as Walt Disney Co., Amazon.com Inc. and Netflix Inc.

Select U.S. large-cap momentum stocks

 

RANK COMPANY SYMBOL MKT. CAP. (US$ BIL.) 5D PRICE PERF. (%) 13W PRICE PERF. (%) YTD PRICE PERF. (%) 1Y PRICE PERF. (%)
1 AT&T Inc. T-N 280.0 8.5 20.4 35.7 15.8
2 Eaton Corp. PLC ETN-N 36.9 11.2 11.9 28.2 2.6
3 Parker Hannifin Corp. PH-N 23.6 13 11.9 23.7 1.2
4 Sun Life Financial Inc. SLF-N 25.5 4.7 10.6 30.8 12.1
5 T. Rowe Price Group Inc. TROW-Q 28.0 8.2 13.4 30.1 7.9
6 Apple Inc. AAPL-Q 1,010.0 6.9 15.1 41.7 0.7
7 Celanese Corp. CE-N 15.3 9.2 19.3 38.2 7.7
8 Lam Research Corp. LRCX-Q 33.6 5.6 30.1 71.9 50.6
9 Applied Materials Inc. AMAT-Q 47.6 4.1 24.2 57.5 31.2
10 NXP Semiconductors NV NXPI-Q 30.6 8 17.3 50.1 23.6

 

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