While the stock market correction continues, the best mutual funds bet billions on Apple (AAPL), Nvidia (NVDA), Micron Technology (MU) and Mastercard (MA) in the latest list of new buys by top money managers.
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Apple led the charge, taking in an estimated $2.4 billion. Nvidia ($1.5 billion), Micron ($1.1 billion) and Mastercard ($1 billion) also made the billion-dollar club. Joining them were Coterra Energy (CTRA) ($1.6 billion), Regal Rexnord (RRX) ($1.2 billion), Centene (CNC) ($1.1 billion) and AbbVie (ABBV) ($1.1 billion).
Microsoft (MSFT) and Bank of America (BAC) just missed a seat at the table, taking in $972 million and $946 million, respectively.
Note: Be sure to check these Excel files, updated and published each month, to see all the stocks on the latest list of new buys and list of new sells by the best mutual funds.
Apple, Nvidia Reveal 3 Clues To Watch As Market Corrects
In a stock market correction, most stocks follow that downtrend and pull back. But, ultimately, corrections set up opportunities once a follow-through day marks the start of a potential new uptrend. As we wait for a change in market direction, investors can take steps now to profit when the stock market indexes make a change for the better.
Apple, Nvidia, Microsoft and many other names on the list of new buys by the best mutual funds reveal three key factors to watch during this transitional period.
1. Check The Relative Strength Line: Leading Or Lagging?
The relative strength line provides one telltale clue that separates the leaders from the laggards.
The RS line compares a stock’s price performance to that of the S&P 500. A rising relative strength line means the stock is outpacing that benchmark index. A down-trending RS line shows underperformance.
During a correction, the relative strength line gives you an early look at stocks perking up ahead of a potential breakout or follow-through day.
What about Apple, Nvidia and Microsoft?
Apple’s relative strength line has moved essentially sideways since December of last year, perking up a bit in January. Comparing that resilience to the RS line for the tech-heavy Nasdaq, you can see that Apple is holding up relatively well.
Nvidia has had more of a struggle. Its RS line began a sharp decline in November. At the end of January the relative strength line began to trend higher, but it remains well off its prior highs. But the fact that it’s moving in the right direction recently is a clue. Keep a close eye on the relative strength line to see if it continues to trend higher as the market looks to rebound and the best mutual funds continue to pick up shares in NVDA stock.
The RS line for Microsoft has also slipped, although less dramatically than Nvidia. Microsoft is also now showing hints of improving relative strength.
Use the RS line to gauge resilience and any rebounds as you look for clues of stocks that could lead in the next rally.
2. Are Apple, Nvidia And Your Stocks Above Or Below Key Moving Averages?
Just as we track whether the S&P 500, Nasdaq and Dow Jones Industrial Average are above or below their moving averages, do the same for individual stocks.
When the indexes come under pressure and fall into a correction, think of the 50-day and 200-day moving average as a first line and second line of defense. (On a weekly chart, use the 10-week and 40-week lines.)
Apple found support at its 40-week line last month. It’s now testing resistance at its 10-week moving average. Look for Apple to decisively retake that line to show rebounding technical strength.
While Nvidia trades between its 40-week and 10-week line, also consider this aspect of those benchmark lines: Are they trending higher or lower? For Nvidia, the 40-week line has trended steadily higher, but the 10-week line continues in a southerly direction. Look for that to turn around.
Microsoft has shown somewhat similar action to that of Nvidia. The cloud, software and video game giant trades below its 10-week line while testing resistance at its 40-week moving average.
Another note on moving averages: It’s a sign of rebounding technical strength when a shorter-term moving average (like the 50-day line) crosses back above a longer-term moving average (like the 200-day line).
While Apple’s 10-week line has remained solidly above its 40-week line, keep an eye on Microsoft and Nvidia. It would be a bad sign if their down-trending 10-week lines slipped below their 40-week lines.
As the market looks to flash a follow-through day and rebound, take a look at the moving averages for stocks being bought by the best mutual funds and those on your own watchlist.
3. Any New Buys By The Best Mutual Funds Near Buy Points?
Finally, look for stocks that are in or near a buy zone. The best stocks tend to break out right as a new uptrend begins. So go through this list of top investments by the best mutual funds and see which may be setting up to move.
Apple is forming a third-stage double bottom as it tries to get back above its 10-week line. Microsoft and Nvidia continue to try to establish new buy points.
For more aggressive investors, consider using trend lines to pinpoint earlier entries than those from conventional chart patterns.
Profits Come To Those Who Prepare
Analyzing these three telltale clues, review Apple, Nvidia, Microsoft and the other stocks on the latest list of new buys by the best mutual funds. The top funds have scooped up shares in these stocks for a reason. But that doesn’t mean now is the right time to buy them.
In addition to reviewing the general market conditions and the story behind the stock, use charts to pinpoint the lowest-risk, highest-reward time to get into these stocks. That will keep the odds in your favor as we wait for the market to turn around.
Follow Matthew Galgani on Twitter at @IBD_MGalgani.
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