This Stock Will Lead the Market to New All-Time Highs By Jeff Clark
One of the market's leading stocks rallied more than 4% yesterday on the back of a better-than-expected earnings report.
And that – paired with the seasonally bullish period we're currently in – is exactly what could help fuel one last stock market rally to new all-time highs.
Let me explain…
Last month, I argued that the bull market wasn't over. Despite the S&P 500 trading almost 3% off its highs and a number of technical indicators starting to look bearish, I explained why this tired, old bull market still had at least one more rally left in it.
The seasonal period between March 1 and April 30 tends to be bullish. The S&P 500 has rallied in nine of the past 10 years during this two-month time frame. And the average return was more than 5%.
So early March seemed to be a good time to buy stocks… or at least not yet time to be getting aggressive with short positions.
The S&P 500 has rallied about 30 points since then. That's a gain of 1.5%. It's a reasonable upside move for five weeks. But it's hardly the show of strength we usually get this time of year. And with banking stocks looking like they're ready to roll over and weakness in the transportation sector, lots of folks are questioning whether the seasonal strength will happen this year.
One of my Twitter followers recently asked me (@JeffClarktrader), "Is the April bull really that reliable? How easily can you be fooled?"
It's important to remember there are no guarantees in the stock market. Nothing is 100% reliable. Seasonal trends, chart patterns, and technical indicators simply help you assess the probability of a trade working in your favor and help you craft a strategy with a favorable risk/reward scenario.
That said… there is a strong seasonal tendency for stock prices to push higher in March and April. That push has been fairly weak so far this year. But based on the action we saw in semiconductor giant Intel (INTC) yesterday, we may be in for a strong bullish move over the next two weeks.
As regular Growth Stock Wire readers know, Intel tends to lead the broad stock market. If Intel falls, the stock market tends to fall as well. But if Intel rises, it's usually a good sign for the broad stock market.
Take a look at this chart of INTC…
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INTC broke down badly in early March. The stock sold off nearly 14% when it lowered its revenue and earnings guidance for the quarter. (I warned readers about this move here.)
The decline in INTC pressured the entire technology sector. And since shares of INTC tend to lead the market, weakness in INTC has been like an anchor around the neck of the S&P 500. No doubt, the weak action in INTC has contributed to the sluggish performance of the stock market over the past few weeks.
But yesterday, INTC shares jumped on the heels of a less-than-catastrophic earnings report. With expectations so low and the stock so beaten down, even a lackluster report pushed the stock up more than 4%. And strength in INTC shares should lead to broad stock market strength.
Here's an updated chart of the S&P 500…
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The index is still holding above the support line of the rising-wedge formation (the blue lines) I first showed you last month. It's also on the verge of breaking out to the upside of a consolidating-triangle pattern (the red lines). These are bullish developments that should only improve as the market follows INTC's lead.
Add to that the traditional seasonal strength and you have the potential for a move to new all-time highs within the next two weeks.
It's not guaranteed. But the risk/reward setup still favors buying stocks on weakness versus getting aggressive on short sales. That will change as the market rallies and we get closer to the end of the month. But for now… traders should keep buying the dips.
Source:
www.growthstockwire.com
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