While the market has had an incredible year with equities and indices reaching fresh all time highs on a regular basis, there are a handful of Dow stocks that have rocketed to record highs a bit too quickly, or that have had other issues, and could now be in danger of a fall from here according to experts.
One such stock is Boeing, which has sustained problems due to the 737 Max debacle. The airline manufacturer’s recent decision to hold off on 737 Max production will slash 0.5 percentage points from gross-domestic-product growth in the first quarter of 2020, JPMorgan said Tuesday.
Another stock which has performed well but may have moved too far too fast, according to experts, is Microsoft.
“Obviously the whole Dow would be higher if it wasn’t for the problems that Boeing has been having, and a lot of the stocks have just rallied up a little too much at least on the near term basis. I think I’d be a little bit concerned. And Microsoft is one of those names. Now this is purely a technical call. It’s a great company with a great fundamental outlook. But if you look at the long-term chart, sorry it’s a weekly chart, it’s weekly RSI chart is becoming quite overbought. It has been more overbought at times, and I think it could rally a bit more into the end of the year, and could reach that kind of extreme, but if you look also at its 200 week moving average. It’s now trading at a 72% premium to its 200 week moving average. It’s only had one other time since the great tech bubble of the 1990’s when it’s been this high. It reached 75% back in late September of last year, but of course the stock rolled over and sold off 18% over the next three months,” Matt Maley of Miller Tabak said on CNBC.
While Tabak sees Microsoft as a bit lofty based on technical aspects, he warns investors not to run out and short the tech behemoth.
“Again this is not something where I’m saying, ‘oh gosh you got to sell the stock,’ or I certainly wouldn’t short it, especially before the end of the year, but it’s when you might be able to pull back and get a cheaper price at some price point as we move into the new year,” Maley explained.
Another stock that is perhaps a little overvalued at this point, according to experts, is Apple, which has had a banner year.
“I think Apple doesn’t look like a great risk reward. Not because I think it’s in danger of falling, but I think it’s in danger of stalling. It had an unbelievable year. It’s up more than 70%. It’s been a real juggernaut this year. But I think a lot of the good news is kind of baked in,” Boris Schlossberg of BK Asset Management said on the same CNBC segment.
Schlossberg notes that Apple may be suffering from an industry-wide phenomenon, where hardware their business has diminished over the last few years.
“If you look underneath the hood I think basically the hardware business has been in a stall since 2015. Gross profit margins peaked in 2015. And so really all the growth now is coming in services. And that’s why I think they essentially the easy pickings have already been made, because I don’t really see Apple plus as a big hit for them. In fact I think it’s gonna be a huge disappointment. The one upside I would say for Apple, the outlier or bullish case here, is if 5G in China really takes off,” said Boris.
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