DJIA : Three Stocks to Watch
(Fri, 22 Jan 2021). The Dow Jones, Nasdaq 100, S&P 500 and Russell 2000 trade at or near record levels, despite turbulent market conditions last week and lingering bouts of risk aversion this week. With sentiment seemingly at a crossroad, upcoming quarterly reports from some of the market’s largest and most influential companies could play an impactful role in where the indices head next. While a plethora of corporations are due to report next week, the three listed below are set to be some of the most impactful for a variety of reasons.
Microsoft is set to report Tuesday afternoon and is currently the second largest company in the S&P 500 and Nasdaq 100 by market capitalization and therefore index weight. Beyond its size, recent price action reveals a gradual uptrend for the behemoth tech company as it trades within a few percentage points of its all-time high near $232.
Potential resistance in the event of a positive price reaction to the news resides along the line drawn from its record high at $232. A break above this level could open the door to a continuation higher. Nearby resistance might exist around the $210 mark. Regardless of direction, Microsoft’s weighting within the major indices lends it influence over the S&P 500 and Nasdaq 100, so a concerted move could be felt in the broader market.
Boeing was included in my previous list of important stocks to watch and it has consolidated further since. As we noted then, stock-specific issues have hamstrung the Chicago-based company and after a recent golden cross, it could be argued the technical outlook is encouraging.
With the Wednesday release of their earnings report likely to provide insight into the company’s efforts to regain its footing, the event could provide the fundamental catalyst required to create upward momentum that the technical landscape is hinting – or cripple the attempted recovery if results fall short of expectations. Acting as a key component of the Dow Jones Industrial Average, a strong recovery in Boeing shares could see the blue chip index close the gap to the S&P 500 and Nasdaq 100. As a member of the industrial sector, its performance could extend or curtail the rotation into the industry that has been a theme over the last few months.
Nearby support might reside at the $200 mark with the 200-day simple moving average ticking higher beneath. Resistance is perhaps more prevalent with potential barriers around $225, $234 and $244. Over the longer term, a break above the June and December highs could be viewed as a meaningful development in prolonging the recovery rally. The MACD indicator should be watched closely as a crossover beneath the zero line appears imminent on the daily chart.
Edging out Microsoft for the top spot, Apple is the largest company by market cap and possesses significant influence over all three indices and will report Wednesday after the close. Due to its size and track record, the Cupertino, California based company is a crucial driver of market sentiment. In the past, a surprisingly poor Apple earnings report even sparked a flash crash in the USD/JPY currency pair.
Often regarded as one of the most steadfast companies in the world, the expectations around Apple understandably high. Recent price action has seen the stock surge from $128.50 to $138 in just three sessions, perhaps in anticipation of the upcoming report. While encouraging, this rally may place Apple in a unique position after the report is released as it could see a follow-up rally cut short or see a drastic pullback to erase the recent charge higher.
Either way, the longer-term outlook for Apple remains constructive in my view and deep pullbacks may provide an opportunity to gain exposure at lower prices. Nearby support might reside at the area around $126 to $124.50. The Fibonacci level around $130.40 may also play a supportive role, but a break through the range beneath would be more meaningful in the bigger picture. Initial resistance likely resides at $138 and $144.
All three stocks carry an innate ability to influence their respective sectors and the indices on which they trade due to their size and reputation. Each should be watched closely for cues on broader market sentiment and performance. Alongside Microsoft, Boeing and Apple, companies like Tesla, Facebook and Caterpillar are also set to report next week.
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