In the second edition of our "top picks" series of articles, we examine the most overlooked and undervalued stocks in the last month of 2021, a year that is proving to be quite turbulent even at its final stages. Those investment opportunities are particularly enticing given that the general trading volume tends to wane drastically in December, usually marking the end of one major cycle and the beginning of another.
First on our list is Boeing, as the company is still desperately trying to recoup from the pandemic fallout. The aircraft manufacturer is also attempting to regain its former image as a reliable producer following two fatal crashes with its 737 Max model.
A recent incident with another 737 Max, being operated by the Indian SpiceJet ltd., is sure to cast further doubt on the model's reliability after a flight was forced to turn back to Mumbai airport on Thursday because of a technical issue with the engine.
Bearish pressure thus keeps on pulling BO's share price down, even though the broader market sentiment appears to be gradually stabilising. In the wake of the 2020 stock market crash, Boeing's share price started developing a new uptrend. It takes the shape of a 1-5 Elliott impulse wave pattern, as shown on the weekly chart above.
Upon completing the first major impulse leg (0-1) below the 61.8 per cent Fibonacci retracement level at 310.33, the price action is currently establishing the first retracement leg (1-2). This correction, being represented as a descending channel, is expected to bottom out around the 23.6 per cent Fibonacci at 174.46, which is where investors may try to buy Boeing's discounted shares on the expectations for a reversal.
They should not do so now, however, given that the price action remains concentrated below the 38.2 per cent Fibonacci at 226.39, which is converging with both the 100-day MA (in blue) and 50-day MA (in green). This convergence is making the latter an even more prominent resistance. Ultimately, once BO's rally is resumed, the next target for the second impulse leg (2-3) would be the 61.8 per cent Fibonacci.
It was just revealed that U.S. medical device manufacturer Medtronic would be investing a quarter of a billion dollars in a bid to expand its operations. The move to a larger facility elucidates the company's prospects for growth over the next several years.
This means that the intrinsic value of Medtronic's shares is bound to rise parallel to the increase of its operations, which entails an excellent opportunity for purchasing the company's shares ahead of this process.
As can be seen on the weekly chart above, there are definite signs of potential strengthening of the share price above the 38.2 per cent Fibonacci at 111.52, given last week's snap rebound. The next prominent support can be found at the 61.8 per cent Fibonacci at 96.45, just below the psychologically significant turning point at 100.00.
At present, the widening Bollinger Bands underscore the mounting levels of adverse volatility in the market. At the same time, the Stochastic RSI indicator is threading in its oversold extreme, which could be a precursor to a bullish rebound.
Our final pick is Philip Morris, a tobacco manufacturer. Similarly to Altria, which was examined in our article from November, PM is likely to benefit from an expected upsurge in demand across the sector.
PM's share price is also establishing a broad correction, similarly to the previous two companies, as shown on the weekly chart above. The correction could reach a dip at the 38.2 per cent Fibonacci at 81.85, though it may very well bottom out slightly above the major support at 84.60. It is underpinned by the crossover between the 100-day MA (in blue) and the 200-day MA (in orange).
On the one hand, the emergence of a Hammer candle from the latter. Represents an early indication of a probable bullish reversal. On the other, the development of a Gravestone Doji just below the upper limit of the channel and the resistance at 91.30, highlighted by the 300-day MA (in purple), implies the likely extension of the correction further down south.
Investors should therefore consider purchasing Philip Morris shares only on the condition that there are definite signs for the correction's termination. Those would include either a decisive breakout above 91.30 or a rebound from one of the two supports.