Buy the Dip on These 2 Blue Chips
Both stocks have struggled with the broad market sell-off lately
The two best Dow stocks in 2019 have been Visa Inc (NYSE:V) and Microsoft Corporation (NASDAQ:MSFT). However, the blue chips have not been immune to the broad-market sell-off in recent weeks. The good news is that these pullbacks could be short-lived, if history is any indicator.
Looking at Visa first, the equity has crept back to its 80-day moving average, after a lengthy period above it, defined for this study as being above the trendline 60% of the time in the last two months, and eight of the previous 10 trading days. Schaeffer's Senior Quantitative Analyst Rocky White notes that the eight previous run-ins with the 80-day have resulted in an average one-month gain of 4.6%, with six of the eight returns positive.
From its current perch at $173.29, a pop of similar magnitude would put Visa stock around $180, just south of itsJuly 29 record high of $184.07. This would also fill the bear gap from Monday's sell-off, which saw V breach its 80-day trendline on a closing basis for the first time since late January.
Options traders have focused on puts lately. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), V's 10-day put/call volume ratio of 1.25 ranks 3 percentage points from an annual high. This indicates the rate of put buying relative to call buying has been quite accelerated the past two weeks.
Microsoft stock has also pulled back to its 80-day moving average. According to White, 11 similar meet-ups from recent years have yielded an average one-month gain of 6.4%, with 10 of the 11 returns positive. Trading at $134.69 at last check, a move higher of similar magnitude puts MSFT at $143, barreling past its July 26 all-time high of $141.68. Year-to-date, the tech titan is up 32%.
