The accelerated speed of market rotations may make it harder to pin down winning stocks Microsoft (MSFT) and Apple (AAPL), but opportunities remain in a surprising safe haven of tech sector highlights.
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How to Make More Money by Tapping Faster Market Rotations
Sector shifts that would have taken a quarter or two in the past are happening much faster now, John Kosar, president and chief market strategist at Asbury Research, told Investor’s Business Daily’s “Investing with IBD” podcast. “They’re not doing that anymore, they’re very fast.”
Audio version of podcast episode
“I had to figure out a better way to be in the right sectors at the right times,” he said. “That was faster than waiting until you could see the relative performance on the chart, because by the time you see it, the trend is half over.”
Kosar says he looks at sector ETF asset flows in a model designed to quantitatively identify long and overweight opportunities in market sectors. And the model continues to show the technology sector at the top.
“The way the market is moving right now, there are a handful of mega-cap AI-related stocks that are really driving the bus,” Kosar said. Investors are treating larger-cap tech stocks, such as Microsoft stock and Apple stock, as safe havens, briefly flowing into other areas, such as utilities or materials, before retreating back into the tech sector.
This is how mega-cap tech stocks create opportunities for investors.
Microsoft Stock Forms continuation chart pattern
Kosar says Microsoft stock forms a chart pattern called an ascending triangle, which indicates that the established uptrend will continue. Microsoft stock began forming the pattern in March, with dips in the stock rising consistently until the stock broke out on June 11.
Kosar says that Microsoft’s previous lows were caused by investor indecision, and that the tech giant still has upside potential. He says that as long as the stock stays above the upper boundary of the ascending triangle, at 430.82, the stock could potentially reach Kosar’s price target of 473.
According to IBD Research, Microsoft stock currently has a Composite Rating of 94 and is ranked #1 in the Computer Software-Desktop group.
Apple’s AI lag creates opportunities
Apple stock is another name that Kosar says can capitalize on investor indecision. The tech giant’s stock began underperforming in July 2023 as investors favored other tech giants over Apple, which lagged behind its peers due to a delay in disclosing details about how the company was playing the generative AI boom. But things began to turn around after the stock soared on earnings in May and AI announcements in June.
“Nobody wants to buy that new high because it’s too scary for them,” Kosar said. “Well, that changed when that news came out on June 11th.”
Apple unveiled plans to apply generative AI to its products, including the iPhone and Mac computers. Apple shares broke out of consolidation that day, rising more than 7%. The stock is now trading tight, near a record high.
Apple stock remains extended from its most recent pivot point, but could be in the early stages of forming a new base with an entry around the 220 price level. The stock has a Composite Rating of 92 and is ranked #2 in the Telecom-Consumer Products Group according to IBD Research.
Impact of Apple and Microsoft on the market
While Apple stock and Microsoft look bullish, they are extended from the right buy points. Investors looking to get into these leading technology names should be patient and wait for new entries to develop.
With artificial intelligence paving the way for more growth, the fundamental story for both stocks remains intact. That, combined with the stocks’ strong technicals, indicates their dominance is likely to continue.
For traders with portfolio allocations elsewhere, seeing solid action from Apple stock and Microsoft stock should still be viewed as a positive. Their outperformance supports the bull scenario for the broad market because their index weightings are so heavy.
Could sector rotation emerge in a more pronounced way, leading to underperformance and a deterioration of the index? Absolutely. This makes monitoring these rotations particularly important.
Click here to discover why being faster at trading market rotations can help you make more money.
Follow Mike Juang on X on @mikejuangnieuws and on Discussions on @namedvillage.
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