Half Of S&P 500 Stocks Still Below 200-Day Average, Ignoring Covid-Like Rally: 10 Bargain Plays For Latecomer Bulls
Late to the bull party? Nearly half of S&P 500 stocks continue to show no significant trend breakthroughs to date.
What Happened: SPDR S&P 500 ETF Trust (NYSE:SPY) gaining over 10% since Oct. 27. This marks the index’s strongest 17-day rally since November 2020, a surge initially fueled by the Covid-19 vaccine breakthrough.
The year-to-date return for the broader market now stands at 18%, nearly doubling the 30-year average annual return of 9.862%. However, this bullish sentiment isn’t uniformly reflected across the board.
Surprisingly, only about 52% of S&P 500 components are currently trading above their 200-day moving average, often viewed as a key technical determinant of a stock’s long-term trend.
Rewind to November 2020, a comparable rally saw 90% of S&P 500 stocks trading above their 200-day moving average.
Chart: S&P 500 Had Its Best 17-Day Rally Since November 2020
Top 10 S&P 500 Stocks With The Widest Discounts
Only about 52% of S&P 500 components are currently trading above their 200-day moving average, despite the robust rally of the past weeks.
Some stocks — EPAM Systems Inc. (NYSE:EPAM), Citigroup Inc. (NYSE:C), Quest Diagnostic Incorporated (NYSE:DGX), and Agilent Technologies Inc. (NYSE:A) — are hovering near these levels. Others are lagging considerably behind.
The table below reveals the 10 S&P 500 stocks exhibiting the largest price discrepancies when compared to their 200-day average levels.
|Name||Last Price||% Distance vs. (200-Day Avg.)|
|SolarEdge Technologies, Inc. (NASDAQ:SEDG)||78.87||-64.91%|
|Illumina, Inc. (NASDAQ:ILMN)||95.72||-46.74%|
|FMC Corporation (NYSE:FMC)||53.11||-44.98%|
|Enphase Energy, Inc. (NASDAQ:ENPH)||98.16||-37.97%|
|Paycom Software, Inc. (NYSE:PAYC)||178.38||-37.31%|
|The Estée Lauder Companies Inc. (NYSE:EL)||120.10||-36.44%|
|Albemarle Corporation (NYSE:ALB)||125.97||-36.37%|
|Moderna, Inc. (NASDAQ:MRNA)||77.42||-35.96%|
|Align Technology, Inc. (NASDAQ:ALGN)||215.07||-30.99%|
|Walgreens Boots Alliance, Inc. (NASDAQ:WBA)||20.87||-28.27%|
Risk of Value Traps?
A stock significantly below its 200-day moving average may indicate either a potential bargain or a fundamental issue with the company.
A value trap occurs when a stock appears to be cheap but is actually fairly priced due to declining business prospects.
Therefore, it’s crucial to differentiate between a stock that’s undervalued due to market overreactions and one that’s declining due to underlying business problems.
In conclusion, despite being a a powerful tool for understanding long-term market trends, the 200-day moving average also has its own limitations. It’s a lagging indicator, meaning it reflects past price movements and may not accurately predict future trends.
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