Be Ready to Buy
The powerful bull market that began in March 2009 is still in
force. My overall annual targets (established in December 2010) for
the Dow Jones Industrial Average, S&P 500 and Nasdaq remain at
12,800, 1,400 and 3,700, respectively. However, a consolidation is
probably due shortly before buyers push the major indices to these
levels.
There will no doubt be pullbacks and tests as the market
continues to climb the wall of worry, but the trend is clear:
The bull market has been confirmed.
So, traders should treat these as buying opportunities to get our
top stock picks for a better price.
Here are our top stocks to buy for May:
Top Stock #1 - Arrow Electronics (ARW)
Arrow Electronics Inc.
(NYSE:
ARW
) is one of the world's largest distributors of electronic and
computer products to industrial and commercial customers. An
emphasis on its global components business through a recent
acquisition should boost revenues and profit margins this year and
next. Selling at just nine times earnings, the stock is cheap
compared to its peers. S&P rates ARW a "four-star buy," and
Zacks has set a target of $51.
Technically, the stock has hugged its 50-day moving average and
support line since hitting bottom last summer. Recently, it pulled
back to those important support lines and reversed up on what could
evolve into a breakaway gap, which occurs when a stock jumps on
high volume leaving a hole or gap in the chart. This is a very
favorable development, especially when combined with a stochastic
buy signal. The stochastic buy signal occurs when the red (fast)
line crosses up through the slow (blue) line.
Our technical trading target for ARW is $50 based on the high
probability of a breakout at $44. Buy ARW below $42.50.
See Chart Key
Top Stock #2 - Advanced Micro Devices (AMD)
Global semiconductor company
Advanced Micro Devices Inc.
(NYSE:
AMD
) offers x86 microprocessors for a wide range of commercial and
consumer markets. The stock was recently upgraded by several
research firms, and the company just reported that Q1 profits
nearly doubled with a modest gain in sales.
AMD became a bottom fisher's stock following the deep "V" low
made last summer. The stock has held above its 200-day moving
average since flashing a golden cross - a powerful buy signal
generated when the 50-day moving average crosses up through the
200-day moving average.
If the stock is able to push through the high above $9.50, its
12-month target would adjust to $13.50. Buy AMD below $8.50.
See Chart Key
Top Stock #3 - Chevron Corp. (CVX)
Globally integrated energy giant
Chevron Corp.
(NYSE:
CVX
) engages in most forms of energy exploration and development.
Higher oil prices, production efficiencies and reduced refining
activities have allowed CVX to concentrate more of its efforts in
Asia, which should result in higher margins and growth potential.
S&P rates the stock a "five-star strong buy" with a target of
$127 in 12 months.
Technically, CVX has hugged its 50-day moving average since
August 2010, and reversed from it in April, triggering a stochastic
buy signal. The stock then gapped through its 20-day moving average
and looks like it might successfully attack the high at close to
$110. A close above that high would yield a near-term trading
target of $120. Buy CVX at $106.50.
See Chart Key
Top Stock #4 - DuPont (DD)
Chemical giant
DuPont
(NYSE:
DD
) offers a variety of products and services for many global markets
including agriculture, food, electronics, building and
construction.
On April 21, DD reported Q1 earnings of $1.52 versus analysts'
expectations of $1.37, and it raised its full-year forecast. Ford
Equity Research maintains a "strong buy" on the stock.
A break though the triple-top at $56.50 should result in a quick
move to $60 and an acceleration to as high as $75 by year end. Buy
below $55 or a breakout from its high at $56.50.
See Chart Key
Top Stock #5 - Marathon Oil Corp. (MRO)
Integrated international energy company
Marathon Oil Corp.
(NYSE:
MRO
) is engaged in exploration and production, and oil-sands mining.
It also explores for, produces and markets liquid hydrocarbons and
natural gas. Credit Suisse recently raised its target on MRO to $57
due to a re-evaluation of its "cheap inland crudes."
Technically, note the heavy accumulation of the stock and a
recent buy from the stochastic indicator. The fact that MRO's
recent pullback held at its 50-day moving average, and then
reversed and gapped through its 20-day moving average, means that
the chance of a successful drive through a triple-top at $54 is
very high.
Buy MRO below $51 or on the breakout from $54 with a trading
target of $60.
See Chart Key
Top Stock #6 - NetApp Inc. (NTAP)
NetApp Inc.
(NASDAQ:
NTAP
) provides enterprise storage and data management software. The
company has an impressive record of earnings growth, robust revenue
growth and expanding profit margins. In the past fiscal year, NTAP
improved its earnings per share by 40%, which is just the last in a
string of solid earnings over the past two years. Analysts' price
targets average over $60.
Technically, NTAP ran into selling in February that ended with
two selling climaxes and opened two gaps. A trading gap is a change
in price levels between the close and the open of two consecutive
days. As long as a stock does not change its major trend, gaps are
usually closed by reversals in price that move into and above the
open pocket on the chart.
The recent rally closed the first of two open gaps on NTAP's
chart. The gap at $55.10 to $58.19 has not closed, and this open
gap is a trading target. There is also a
Moving Average Convergence/Divergence (MACD)
buy signal because the red (fast) line is above the blue (slow)
line. Longer term look for NTAP to break its high with a 12-month
target in the mid-$60s. Buy NTAP below $52.
See Chart Key