European STOXX to Buy at Six Year High
While the bears are looking for reasons for world markets to fall apart and begin the massive sell-off they are all clamoring for, the SP 500 hit another intra-day all-time high. Housing data was weak, earnings are missing because of a lame cold weather excuse and the market doesn’t care. Further defiance has come by way of Europe, with the STOXX Europe 600 closing at a level it hasn’t seen since January 2008. That’s right, even with all those PIIGS in the barn the market is still on fire.
A long time ago I gave up on trying to find reasons for the unreasonable. It’s a skill I’ve acquired while dealing with angry girlfriends, belligerent drunks, and financial markets. Rather than trying to convince the market it is wrong, I listen to what it’s saying to me, albeit in an angry drunken stooper. Right now the market is saying it’s going to go up no matter what the bad news is.
For the most part, European stocks have flown silently under my radar. The occasional name popped up in my sights but there have been so many compelling stories here there has been little reason to peak across the pond. With the STOXX 600 on the verge of breaking higher I figure now is as good a time as any to find a few European gems that trade here in the US and are also members of index.
Lloyds Banking Group (LYG) gives me Mary Poppins flashbacks whenever I think of it. Lloyds of London has been around longer than the US, with Lloyds Bank being established in 1765. Heritage alone is not enough reason to shell out shillings on this stock but a Zacks Rank #2 (Buy) may be. Two analysts have guided higher for the current year, pushing consensus up from 40 cents to 44 cents. While a crusty old bank may not be the sexiest thing to talk about, perhaps the European bank stocks are poised to mimic the run we saw on US bank stocks the last two years.
From a technical perspective we have a stock that has taken off since the start of 2013. Here we are 10% above the $5 mark looking for direction. Sitting just below the 25x5 SMA with a slightly overbought stochastic I can say today is not the day to jump in head first. Captain Obvious inside of me says to wait for $5. The unapologetic chartist inside of me tells me to buy at trend line support. We can draw one from the late August lows near $4.50 through today and see the $5.20s as an area to buy.
Tech usually shines during bull markets as higher beta names benefit from a charging market. Looking for tech names in the STOXX 600 you can find Infineon Tech (IFNNY) trading over the counter here in the US. This chipmaker headquartered in Germany has a Zacks Rank #2 (Buy) mostly due to an upside earnings revision for the current year, raising consensus from 47 to 52 cents per share. A glance at the price and consensus chart shows a story that was great up until the middle of 2011. Since then, earnings consensus has dropped consistently, until very recently. A change in current year consensus could spell a change in the weather longer term for Infineon.
The chart is in breakout mode right now. $11 has been a firm cap and today’s price action is butting up against it. Overbought stochastics and the early February break above the 25x5 SMA has the stock firmly in bull territory. The good news about swinging for the fences with a breakout trade is you can put a tight stop loss on it and if you’re wrong you’re wrong small, if you’re right, you’re right big. Given IFNNY’s propensity to seesaw upwards a safer trade than the breakout is to wait for the stock to come back down to retest $11 after it breaks above. While this may not quench your thirsts for profits today, it could lead to refreshing profits later in a week or two. Even when the stock gapped up in late April 2013 eventually it filled the gap prior to heading higher.
The third idea I found came as a shock to me given what I saw at the auto show and the Zacks Rank of domestic automakers. Daimler AG (DDAIF) has been on a tear since mid-April 2013 and is knocking on the door of $100. I read somewhere that 80% of stocks that trade at $90 hit $100 within 6 months. I don’t know if that’s true and I don’t know if it’s something stock brokers made up but I have seen lots of $90 stocks hit $100 in short periods of time. Daimler appears to have broken above $90 and may have triple digits in sight.
This Zacks Rank #1 (Strong Buy) is peeling out down the road like an AMG powered Mercedes. To extend the car metaphor, the gauges are pinned right now. Stochastics are well into an overbought position, redlining at 97 and the 25x5 SMA is as forgotten as a speed limit on the Autobahn. This rally could very easily extend to test $100 before Daimler runs out of gas.
Read the Full Research Report on DDAIF
Read the Full Research Report on IFNNY
Read the Full Research Report on LYG
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