The S&P 500 index has been battered and bruised in the past six weeks, dropping nearly 35% before bouncing on March 24, but not all components have suffered equally. A handful of mavericks are bucking the downward tide, selling products and services that could benefit from the pandemic or exhibiting usual relative strength that is hanging tough at higher support levels, despite intense selling pressure.
There aren’t many surprises near the top of the index performance list, with video-conferencing and blue-chip biotech companies leading the charge. Even The Kroger Co. (KR) in the seventh slot makes perfect sense, given the mad rush to stock up pantry shelves to deal with weeks or months of quarantine and shelter-in-place orders. Other leaders aren’t quite as intuitive, like gaming software and hardware manufacturers, which are holding relatively close to rally highs.
Citrix Systems, Inc. (CTXS) makes cloud-based video conferencing software. This is one of the stocks that mysteriously found its way into the portfolio of Georgia Senator Kelly Loeffler after her briefing on the coronavirus in late January. Looking back, bullish price action pierced five-year resistance in the upper $60s in 2016, generating a strong uptrend that topped out near $117 in the third quarter of 2018.
The stock carved a bull flag into August 2019 and turned sharply higher, breaking out to a new high at the same time that outbreak headlines hit the news media. That impulse stalled quickly, yielding a vertical decline that shook out a large supply of weak hands, ahead of a recovery wave that hit new highs nearly two weeks ago. Expect high volatility if you want to own this issue because predatory algorithms are doing their best to shake out short-term traders.
Regeneron Pharmaceuticals, Inc. (REGN) is developing antibodies to combat the coronavirus. The stock posted an all-time high above $600 in the third quarter of 2015 and turned lower, finding support at the 50-month exponential moving average (EMA) near $350. It carved a series of lower highs and lower lows into 2019’s five-year low at $271 and bounced, carving a strong advance that pierced the trendline of lower highs in February. Price action has been testing that resistance level for the past six weeks.
Accumulation readings have surged in the past two months, lifting the on-balance volume (OBV) accumulation-distribution indicator to the highest high since September 2017. The current conflict has unfolded at the narrowly aligned .618 Fibonacci retracement of the four-year downtrend and the .786 retracement of the 2017 into 2019 selling wave, with a breakout opening the door to a long-awaited test at the bull market high.
NVIDIA Corporation (NVDA) stock is trading more than 50 points below February’s all-time high at $315, but the graphics card giant is still holding the 50- and 200-day EMAs, unlike the vast majority of the big tech universe in March. The company is benefiting from a surge in online gaming by Americans who have been sent home to spend their time working for their employers rather than playing “Fortnite” or “Call of Duty.”
The stock topped out at $293 in October 2018 after a historic uptrend that started in the upper teens in 2015. It sold off more than 50% into December and tested that level successfully in June 2019, ahead of a recovery wave that completed a round trip into the prior high in February 2020. The subsequent breakout failed a few days later, triggering a 135-point decline, but the stock has recouped nearly 80 of those points, suggesting that there’s plenty of firepower for an eventual test of the rally high.
The Bottom Line
A few S&P 500 components have shaken off intense selling pressure and could hit new highs in coming months.
Disclosure: The author held no positions in the aforementioned securities at the time of publication.