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Could Apple and Microsoft Lead a Market Rally?

Maitali Ramkumar - Author

Sep. 18 2019, Updated 11:14 a.m. ET

Jim Cramer believes Apple (AAPL) and Microsoft (MSFT) stocks are ready to boost equity markets to new highs, according to CNBC. Both stocks’ market capitalization has crossed the $1 trillion mark. Based on Dan Fitzpatrick’s chart analysis, Cramer believes these mega stocks could lead a rally in the S&P 500 (SPY) and Dow Jones Industrial Average (DIA).

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Apple and Microsoft stocks: Microsoft set to break out

Fitzpatrick’s chart showed that Microsoft has remained rangebound “between the low $130s and low $140s” in the past three months, according to CNBC. If Microsoft stock breaks above $140, it could have considerable upside potential.

Furthermore, Microsoft stock’s volumes were low last month. Cramer said, “When a stock is in consolidation, low volume means that big institutions aren’t really selling the stock in any sort of quantity, they’re just doing a bit of profit-taking.”

Microsoft stock is currently trading at $137.40, about 0.1% above its 50-day moving average, 46% above its 52-week low of $93.90, and 3% below its 52-week high of $141.70. The stock has returned around 35% YTD (year-to-date) and 22% in the last year. Its market cap stands at $1.05 trillion. To learn more, read Why Microsoft Stock Outperformed Its Peers in August?

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Apple and Microsoft stocks: Apple stock is ready to roar

Cramer believes Apple has seen a pattern of “higher highs and higher lows,” rising above its resistance of $217. Plus, the stock has good volumes. Cramer likes Apple stock and said, “Own Apple, don’t trade it.” He added, “Fitzpatrick recommends sticking with this one as long as the stock remains above its 50-day moving average.”

Apple is currently trading at $220.70, about 6.2% above its 50-day moving average of $207.80, 5% below its 52-week high of $233, and 55% above its 52-week low of $142. The stock has returned around 40% YTD, more than Microsoft stock. However, the stock has returned just 1% in the last year. Apple’s market cap is $997 billion.

Tech stocks’ returns and moving averages

Apple and Microsoft stocks’ performance has been mixed this month. While Apple has risen 5.7%, Microsoft stock has fallen 0.3%. Peers Amazon (AMZN), Facebook (FB), and Alphabet (GOOGL) (GOOG) have risen 2.6%, 1.3%, and 3.3%, respectively, this month. Amazon and Facebook stocks are 2.1% and 1.4% below their 50-day moving averages, and Google is trading 4.0% above its average. Cramer is quite positive on Amazon and sees an approximate 20% upside potential in its stock.

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Market returns and outlook

Equity market indexes are trading above their 50-day averages. SPY and DIA are 2.1% and 2.0% above their 50-day moving averages and have provided good returns this year. SPY has risen 20.4%, and DIA has risen 16.4%. Their YTD gains grew this month, by 2.9% and 2.8%, respectively.

Markets seem to be absorbing the oil supply shock led by recent attacks on Saudi Arabia’s Aramco oil facilities. According to The Wall Street Journal, Prince Abdulaziz bin Salman said that Saudi Aramco had already restored about half of it disrupted supply. It’s expected to regain its full supply by the end of the month.

Markets are also waiting for the Fed’s announcement, scheduled for tomorrow. The Fed has the tough task of setting rates amid the US-China trade war and possibility of a recession. Equity markets might rejoice if the Fed cuts interest rates to boost the US economy. Market participants are expecting an approximate 25-basis-point rate cut. Such a rate cut could mark the beginning of Cramer’s prediction, with Apple and Microsoft stocks leading a market rally.


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