The accelerated speed of market rotations can make it harder to pin down winning stocks like Microsoft and Apple, but opportunities remain in a surprising safe haven of technology sector standouts.
Sector shifts that would last for a quarter or two in the past are now occurring much faster, John Kosar, president and chief market strategist at Asbury Research, tells Investor's Business Daily's "Investing with IBD" podcast. "They don't do that anymore, they're very quick."
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"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 according to the model, the technology sector remains on top.
"The way the market's moving now, there's a handful of mega-cap AI-related stocks that are really driving the bus," Kosar said. Investors are treating larger cap tech stocks like Microsoft stock and Apple stock like safe havens, flowing to other areas like utilities or materials briefly before retreating back to tech.
Here's how mega-cap tech stocks are creating opportunities for investors.
Microsoft Stock Forms Continuation Chart Pattern
Kosar says Microsoft stock is forming a chart pattern called an ascending triangle, which signals its established uptrend is set to continue. Microsoft stock began to forge the pattern in March, with lows in the stock rising consistently until the stock broke out on June 11.
Kosar says the earlier lows in Microsoft stock were caused by investor indecision, and the tech giant still has upside potential. He says as long as the stock remains above the upper boundary of the ascending triangle, at 430.82, the stock conceivably could reach Kosar's price target of 473.
Microsoft stock currently holds a Composite Rating of 94 and is ranked No. 1 in the Computer Software-Desktop group, according to IBD Research.
Apple's AI Delay Creates Opportunity
Apple stock is another name where Kosar says investors can profit off investor indecision. Shares of the tech giant started to underperform in July 2023 as investors favored other tech giants vs. Apple, which fell behind its peers with its delay in revealing details about how it was playing the generative AI boom. But things started to turn around after the stock popped on earnings in May and AI announcements in June.
"Nobody wants to buy that new high because it's too scary for them," said Kosar. "Well, that changed when that news came out on June 11."
Apple revealed its plans to bring generative AI to its products, including the iPhone and Mac computer. Apple stock broke out of its consolidation that day, surging more than 7%. Shares are now trading tightly near all-time highs.
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 No. 2 in the Telecom-Consumer Products Group, according to IBD Research.
Apple And Microsoft Market Impact
While Apple stock and Microsoft look bullish, they are extended from proper buy points. Investors looking to get into these leading tech names need to be patient and wait for new entries to develop.
With artificial intelligence paving the way for more growth ahead, the fundamental story remains intact for both stocks. That, combined with the stocks' strong technicals, signals their dominance is likely set to continue.
For traders with portfolio allocations elsewhere, seeing solid action from Apple stock and Microsoft stock should still be viewed as positive. Their outperformance supports the bull case for the broad market since their index weightings are so heavy.
Can sector rotation rear its head in a more pronounced way, leading to their underperformance and index deterioration? Absolutely. This makes tracking those rotations especially key.
Tap here to learn why handling market rotations faster can help you make more money.
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