As market rotations accelerate, it becomes more difficult to identify the next winning stocks. Microsoft (MSFT) and apple (AAPL), but opportunities remain in the unlikely safe haven of the technology sector’s standout companies.
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How to respond to faster market rotations and make more money
Sector shifts that once lasted a quarter or two are now happening at a much faster pace, John Kosar, president and chief market strategist at Asbury Research, said on the Investor’s Business Daily podcast “Investing with IBD.” “That doesn’t happen anymore. It’s happening so fast.”
Audio version of the podcast episode
“I had to figure out a better way to invest in the right sector at the right time,” he said. “That was faster than waiting to see the relative performance on the charts, because by the time you see the charts the trend is half over.”
Kosar said he studies asset flows for sector ETFs with a model designed to quantitatively identify long and overweight opportunities in market sectors, and the technology sector continues to come out on top, according to the model.
“If you look at the market right now, it’s really a handful of big AI names that are driving the market,” Kosar said. Investors are treating big tech names like Microsoft and Apple as safe havens, temporarily moving into other sectors like utilities and materials before moving back into tech.
Here’s how big tech stocks are creating opportunities for investors.
Microsoft shares form continuation chart pattern
Kosar said Microsoft shares have formed a chart pattern known as an ascending triangle, which is a sign that an established uptrend is about to continue. Microsoft shares began forming this pattern in March, with the stock price consistently rising from lows until it spiked higher on June 11.
Kosar attributes Microsoft’s previous lows to investor indecision and says the tech giant still has room to rise. He says that as long as the stock stays above the upper limit of the ascending triangle at $430.82, Kosar’s target price of $473 could be reached.
Microsoft shares currently hold an Overall Rating of 94, ranking them #1 in the Computer Software – Desktop group, according to IBD Research.
Apple’s AI delay creates opportunity
Courser points to Apple stock as a stock that could benefit from investor indecision. The tech giant’s shares began to stagnate in July 2023 as investors favored other tech giants over Apple. Apple lagged behind its peers in disclosing details about how it was responding to the generative AI boom. But things started to look up after its shares soared on its May earnings and June AI announcements.
“Nobody wants to buy at new highs because it’s too scary,” Kosar said. “But then the news came out on June 11 and that changed everything.”
Apple revealed plans to bring generative AI to its products, including iPhones and Mac computers. Apple’s shares broke out of consolidation that day, soaring more than 7%. The stock is currently trading steadily near its all-time high.
Apple shares remain elevated from the most recent pivot point but may be in the early stages of forming a new base near the price level of 220. The stock has a Composite Rating of 92, according to IBD Research, which ranks it #2 in the Communications & Consumer Products group.
Apple and Microsoft’s impact on the market
While Apple and Microsoft stocks look strong and are stretched from appropriate buy points, investors wanting exposure to these big tech names will need to be patient and wait for new entrants to get in on the action.
With artificial intelligence paving the way for even more growth in the future, the fundamentals for both stocks remain strong, which, combined with their strong technicals, means their dominance is likely to continue.
For traders with other portfolio allocations, the strong performance of Apple and Microsoft should still be viewed as a positive, as both stocks are heavily weighted in the index, and their outperformance supports the broader bullish case for the market.
Could sector rotation become more pronounced and lead to poorer performance and worsening indices? Absolutely. That is why tracking sector rotation is especially important.
Tap here to find out why processing market rotations faster can increase your profits.
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