Is it too late to get in on the Super Six? That’s the old Magnificent Seven, minus the recently not-so-magnificent Tesla . It’s a question we get from members all the time. And for good reason: Apple has rallied the least over the past year but is still up a very solid 36%. Alphabet advanced nearly 60%, Amazon jumped 62%, Microsoft added nearly 68%, Meta Platforms soared 180%. And then there’s Nvidia , the top-performing stock in the S & P 500 for 2023, and now up 220% for the past 12 months through Thursday’s close. Members already know that we love these stocks based purely on their business fundamentals. They are all stocks worth owning. But how? Where are the pullbacks for new investors to get in? We addressed this question for Apple a couple weeks ago, by analyzing its stock chart for key levels of interest based on 2024 earnings estimates. This time around let’s take a look at the rest of the Super Six (we own them all), and an update on our Apple view. The goal: Determine entry points for investors who don’t currently have a position. If you already own shares, consider your cost basis and last buy for entry points. The goal with subsequent buys is to reduce your overall cost basis. Microsoft Three potential entry points: $380, $365 and $342. As we can see on the chart below, $380 was the prior high reached in late November 2023. The polarity principle says that prior resistance, once broken, becomes support. Of course, that’s not a certainty. Moreover, as we can see, the 50-day moving average (the red line) also comes into play at $380, which would represent a 6% pullback from the current price of roughly $405. Should shares fall below that $380 price support, the next area of interest is at the $365 level. As indicated by the red circle to the left, this was past point of resistance and also came into play as support (red oval on the right) several times once we finally broke through that level (again polarity principal at work). This price would represent a 10% pullback. The next level of interest, should the two aforementioned levels fail to hold would be about the $342 level, In addition to being a key resistance area in the past – we can see form the chart that although the stock did move above it at a few instances in mid-2023, it ultimately failed to hold the level – we also find that this is level at which the 200-day moving average comes into play. A drawdown to this level would represent a nearly 16% pullback. Using calendar year 2024 earnings estimates of $12.16, MSFT is currently valued at a P/E of 33.3 times. We’re using calendar year because Microsoft has a funky fiscal year calendar that ends in June and we want to incorporate four quarters of estimates into a forward P/E valuation. That valuation is justified given the expectations for Azure growth to sustain in the mid-20% range and possible upside resulting from adoption of its AI Copilot feature. However, if we apply the 5-year historical average multiple of 28.4 times to that estimate, we get a price of about $345 a share, again putting us at just above that 200-day moving average. That’s a few bucks above our next entry point of $342. The last thing to note, as we can see in the relative strength indicator (RSI) graph right below the chart, the stock’s RSI stands at 79. This indicates an overbought condition (above 70 is considered overbought and below 30 oversold). While that can resolve itself with some sideways action, it’s worth being mindful of, especially if you’re feeling some FOMO (fear of missing out). It could indicate a better entry point on the horizon. Alphabet Three potential entry points: $140, $130 and $120. A pullback to $140 would represent an 8.5% decline and a return to a prior level of resistance (red circles) that shares recently busted through. It’s also less than $2 above the 50-day moving average, providing another layer of support. Should the price fall further, we’d look to the $130 level, a 15% decline. This was resistance (green circle to the left) and then turned to support (green oval) several times once taken out — with the exception of a brief move below $130 on an earnings panic, before it was quickly reclaimed. We also find it near the 200-day moving average. If that $130 price doesn’t hold, we need to proceed with caution as a break below the 200-day moving average will represent a notable breakdown in the technical. However, we would consider shares at $120, as we do find past support coming in at that level, including during that breakdown the last time Alphabet reported earnings in October. For those investors less inclined to wait, a technical breakout could be on the horizon. As we can see from the 3-year chart, we just broke above the previous all-time high. Many look at these milestones as bullish signals; it means people are now willing to pay more than they ever have for the stock. However, the way to play something like this isn’t to buy the initial breakout. Instead, you watch the breakout, then look for a pullback to that old high, $151.55 in this case. Should that level hold and the stock bounce off it, that would be the buy signal. Obviously these are general guidelines, but that’s usually how a technical-oriented trader would approach this move. However, we can see from the RSI, which stands at 78, shares are overbought, so proceed with caution. Alphabet shares currently trade at 22.9 times 2024 earnings estimates, below their 5-year average of 23.4. Amazon Two potential entry points: $150 and $134. As we can see from 4-year daily above, $150 was a major support level back during the peak of the Covid pandemic, and a level only recently reclaimed. It also represents the 50-day moving average and a 5% pullback. From there, we would look to the $134 level, which in addition to being at the 200-day moving average, is also a support level in mid-2022 once that $150 level of support failed. This would represent a roughly 15% decline. On the upside, shares appear to be entering battleground territory at the $160 level, a clear level of consolidation that the stock bounced around for nearly 2 years after the pandemic started. Still, the fundamentals are strong (as is the case for all of these names) thanks to a loosening of IT budgets, efficiency gains made on logistics and the advertising opportunity Amazon has in both e-commerce and Prime Video. Therefore, should we move above the $160 level and hold it, we could certainly be looking at a run near those all-time highs. At 42.8 times forward earnings, shares are trading at a significant discount to their 5-year historic average of 63. Meta Platforms Three potential entry points: $374, $350 and $305. As with Alphabet, we are looking at a breakout in the making, with a test of the $383 level needed as confirmation. Aside from playing the breakout, members will want to be mindful of the $350 level, which would represent an 11% pullback and bring us back to the 50-day moving average. If $350 fails to hold, we would be somewhat in no man’s land until we hit the $305 level, which as we can see, was resistance in late 2020 (green circles to the far left), became support after breaking above it (first green oval on the left) and then served as a battleground area in late 2023. It finally rose about $305 after after several months of consolidation (sideways trading). This level would also bring the 200-day moving average into play as a key level of support, and would represent a 22% decrease. We don’t think it’s likely we get there unless there is a fundamental issue or management goes back to spending like crazy on the metaverse without focusing on near-term profitability. We really don’t see that happening. The RSI stands at 75, meaning overbought, so some consolidation or a pullback wouldn’t be a surprise and the bar is high into earnings. Shares are trading at 22.1 times forward earnings, fairly cheap given all that’s going right with the company at a fundamental level. They are slightly above the 5-year average of 21.1, which was pulled down by the shockingly deep sell-off in 2022. Use that 5-year average valuation on the 2024 earnings estimate of $17.71, and you get to about $374 per share. That’s roughly a 5% pullback, and a tad below the old all-time high. It’s not really a level of note on the chart but for fundamental-oriented investors like us it’s important because valuation is more important than technical in the long run. Nvidia Three potential entry points: $507, $440 and $400. In the chart above, $507 is the level that ran into resistance at several times in the past few months, however, once it was busted through it was off to the races. The polarity principle says to look to that level for support. It’s a decent way down from current levels, about 18%, but that’s what happens when your in record high territory. That level is also near the 50-day moving average. The 200-day moving average is just below the $440 level, which if reached would mean a decline of about 29%. Below $440, the next support level is $400, representing a 35% decline. Here’s the issue with Nvidia: Analysts have been so far off with their estimates that these levels must be taken with a grain of salt. Shares are overbought given the 85 RSI and we can’t advise chasing a parabolic move like we see of the $500 level. However, we also need to be mindful that shares are trading at 30 times forward estimates, a discount to their 39.5 times historical average. If not for the pure speed of this move, it may register as a buy here. But our discipline is to not chase parabolic moves, even with a stock we love like Nvidia. As a result, this may be the toughest of the Six to find an entry point. We’d look for a 5-10% pullback, something in the $587 to $556 area, as a chance to initiate a position. Semiconductor companies are notorious for their boom-bust cycles. But given the demand for generative AI chips and the simple fact that the only place to get the best chips is Nvidia, the boom could go on for a while. And when the bust comes, it may not be so bad as Nvidia continues to grow it’s more steady services revenue stream. Apple Two potential entry points: $191 and $182. Apple recently reclaimed the 50-day moving average, providing a new potential level of support at around the $191 level. The $190 level has been a battleground area where the stock has seen resistance (red circle), some consolidation (green circles), and ultimately support before rallying to all-time highs. When that level has failed, gaps appear lower (pink circles), meaning the stock opened at a materially lower level than the last close. A price of $191 also represents the 50-day moving average, which should be viewed as potential support given shares are trading above it. From there, we drop to around $182. We called out this level last time, noting that it’s proven to be both support (when shares are above it) and resistance (when shares are below). It’s also at the 200-day moving average (yellow line) AAPL is still trading at a premium P/E of 29.6, compared to its 5-year average of 24.2. We think pricey valuation is warranted given the steady growth in services and potential for the Vision Pro to be the starting point for the next generation of computing technology. Each of these six stocks has a 2 rating, which means we are also looking for better entry points to buy more shares. It doesn’t mean we will necessarily upgrade all a stock if it reaches one of the entry points discussed above. Those are for investors that do not yet have a position in these stocks. For investors already in these stocks (like us), we must consider the cost basis and where we last bought shares. However, we’re always looking for an opportunity to upgrade shares, so keep an eye on your alerts. (See here for a full list of the stocks in Jim Cramer’s Charitable Trust.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
Jensen Huang, co-founder and chief executive officer of Nvidia Corp., during the Taipei Computex expo in Taipei, Taiwan, on Monday, May 29, 2023.
I-Hwa Cheng | Bloomberg | Getty Images
Is it too late to get in on the Super Six? That’s the old Magnificent Seven, minus the recently not-so-magnificent Tesla. It’s a question we get from members all the time. And for good reason: Apple has rallied the least over the past year but is still up a very solid 36%. Alphabet advanced nearly 60%, Amazon jumped 62%, Microsoft added nearly 68%, Meta Platforms soared 180%.
Sumber: www.cnbc.com
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