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What are we looking at?

Positive-trending U.S. stocks.

The screen

We limited our pool to the S&P 100 index.

To find the most positive, we looked at each stock's 40-week moving average (40wMA). This is the average closing price for the stock over the past 40 weeks. Charting the moving average week by week gives us a sense of investors' behaviour; are they growing more (or less) enthusiastic about the company's outlook and are they more (or less) likely to purchase the stock? Generally speaking, stocks that trade above their rising 40wMAs are the best candidates for investments; they are the ones that show a bullish pattern. We included only the stocks with a rising average in the adjoining table.

We chose this indicator because stocks tend to stay relatively close to their 40wMAs. When stocks rise far above this average, investors often use this as an opportunity for profit taking, since this usually leads to a price correction toward the 40wMA. Similarly, when stocks decline far below this average investors can usually expect a recovery rally to follow toward the average, providing a selling opportunity.

More about Phases & Cycles

Phases & Cycles Inc. has been providing independent research for more than 25 years, using behaviour analysis. It publishes investment ideas for both the Canadian and U.S. equity markets. Its research reaches more than 1,000 users across North America and Europe.

What did we find?

There are 17 stocks in the S&P100 index that meet our above mentioned criteria. Despite the recent market weakness, these stocks remain positive, as they continue to trade above their rising 40wMAs. Many belong to the consumer-discretionary, consumer-staple and information-technology sectors.

Most of the 17 stocks are in the midst of a minor correction toward their rising 40wMAs. Some have already reached their averages and found support while others are only just starting such a move.

One stock stands out as being extremely overbought: McDonald's. It had an extremely sharp rise from about $90 (U.S.) to $120 and has not yet pulled back to its average, which is currently resting near $104.

AT&T rallied above its rising 40wMA recently and appears to be starting a new up-leg; a sustained rise above $36-$37 would confirm this. Altria has been in an up-trend for the past four years. It started a minor pullback toward its 40wMA last November and now appears set to resume the up-trend; a sustained rise above $61-$62 would confirm it.

Readers should consult a professional before making investment decisions.

A significantly larger list covering more U.S. stocks is available at info@phases-cycles.com.

Monica Rizk is the senior technical analyst and Ron Meisels is the president of Phases & Cycles Inc. (phases-cycles.com). He tweets at @Ronsbriefs. They may hold shares in companies profiled.

Positive trending U.S. stocks