One of the strange quirks of the stock market is sometimes it actually has to go way up before aggressive buyers step-in. This odd anomaly is actually called a buyer capitulation, and it is very similar to when sellers finally give in and throw in the towel at the end of a market sell-off. A new report from Merrill Lynch cites not only buyers finally stepping in big, but very positive technical support that could help to lift the markets to yet another round of new highs.
In their report, the Merrill Lynch analysts noted a clear path higher for the tech-heavy Nasdaq. They also cited a clear preference for the big cap tech leaders.
The Merrill Lynch team says the message from the Nasdaq stock price action and the Nasdaq market breadth is to focus on large cap tech stocks in the index and be selective elsewhere. The good thing for investors is that even in the event of a correction, these tech leaders will hold up far better than the momentum darlings. With a pricey market, that makes good sense.
Here are the seven names that Merrill Lynch likes for a Nasdaq breakout.
Apple Inc. (NASDAQ: AAPL) is the largest market cap stock in the technology sector and just completed a historic and massive seven-for-one stock split. Excitement over the new iPhone 6 is starting to gain traction as rumors of a larger screen and other new improvements are getting the Apple nation stirred up. Plus with a huge earnings beat, the stock split, an increased dividend and share buybacks, the company seems right back on its game.
Trading at just 12 times forward earnings, Apple’s stock remains a solid tech part of a portfolio. Shareholders are paid a 2.1% dividend. The stock is rated neutral at Merrill Lynch, with a $95 price target. The consensus price target for Apple is $94.45. The shares closed Tuesday at $90.28.
Cisco Systems Inc. (NASDAQ: CSCO) is the number one security hardware vendor. Big business has made it abundantly clear that security is a top priority now and going forward. With Fortune 500 companies getting hacked and thousands upon thousands of customers having vital data compromised, this doesn’t look like it will change anytime soon.
Investors are paid a solid 3.1% dividend. Cisco is rated a Buy at Merrill Lynch, and the firm has a $28 price target. The consensus estimate is at $25.63. Cisco closed Tuesday at $24.53.