This morning I put ValuEngine software, the daily and weekly charts and my proprietary analytics to the test to find a better choice.
My Definition of a Value Stock
I want the best value stock to be a member of the S&P 500 and for the stock to at least have a buy or strong buy rating according the ValuEngine Forecast Model. This gave me 16 stocks rated "5-Engine" or strong buy and 170 stocks rated "4-Engine" or buy.
Since the stock market remains under the caution flag of a ValuEngine Valuation Warning with 65.2% of all stocks overvalued, I trimmed the list to only those stocks that were at least 10% undervalued. This cut the list down to just 27 candidates and among them was Apple.
To whittle down the list further I wanted only those stocks that were trading above $10 a share and projected to gain of at least 7.5% over the next 12 months, which is 2.5% above the 5.0% threshold needed to maintain a buy rating. The result was 10 stocks including Apple.
Adding the Technical Component
My technical definition of a value stock is one that is oversold on its weekly chart. Five of the 10 finalists were overbought on their weekly charts, so the list was culled to five. Two had declining momentum and two had rising momentum. Apple wins as the only value stock with oversold momentum with a 12x3x3 weekly slow stochastic reading of just 10.39 on a scale of 00.00 to 100.00 where a reading under 20.00 is oversold. The five-week modified moving average at $456.00 and the 200-week simple moving average at $365.28.
Chart Courtesy of Thomson/Reuters Chart Courtesy of Thomson / Reuters
Apple ($428.35) set a 52-week low at $419.00 on March 4, holding my annual value level at $421.05 on that day and again on March 5.
Apple has a buy rating, is 23.9% undervalued with a 12 month forward price-to-earnings ratio of 8.94, which makes the stock a value play, not a momentum trade. Today, the one-year price target is $461.99.
The daily chart profile shows rising momentum with a 12x3x3 daily slow stochastic reading at 27.43 rising out of oversold territory from below 20.00.
A daily close above the 21-day simple moving average at $443.30 targets the 50-day at $470.60, which lines up with a risky level. I do not see a return to the 200-day at $570.48 any time soon.
My weekly value level is $384.89 with the annual pivot at $421.05, a semiannual risky level at $470.21 and annual risky level at $510.64.
Chart Courtesy of Thomson/Reuters
In my judgment the S&P 500 will have a difficult challenge taking out my semiannual risky level at 1566.9 and its October 2007 high at 1576.09 without help from Apple.
At the time of publication the author held no positions in any of the stocks mentioned.
This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.