US stocks recovered some lost ground during recent sessions, after President Trump accepted a 90 day pause for almost all his reciprocal duties except those imposed on China.
Even in large cap space there are still names that, at the time of writing, are just on the brink of forming “death crosses”, indicating a potential further significant downside.
The Walt Disney Co. (NYSE: DIS), and Bank of America Corp. (NYSE: BAC) are two examples. Does that mean you need to sell both stocks immediately? Let’s explore!
Why you should not sell Disney Stock
Disney’s stock is down by more than 25 percent compared to its high for the year.
DIS’s “death crossing”, or when the 50-day MA of a stock crosses below the 200-day MA over a longer period, could indicate further declines in the weeks to come.
Laurent Yoon is a Bernstein Analyst. He says that the technical indicator, which usually signals a weakening of momentum, and potential for continued price drops, has not moved.
Last week, Yoon reiterated his “outperform” rating on Disney stock, adding that it’s a “complex story with constantly moving parts–linear/sports, parks, and streaming–each with significant gravity and complexity.”
Bernstein’s price target of $120 suggests that investors should buy DIS at current prices.
Investors can then cost-average their positions and build a long-term, solid stake in Disney, at a more favorable valuation, even if he death cross occurs.
Disney’s shares currently yield a dividend of 1.18 percent, making them even more appealing to buy at their current price.
Why you should not sell BAC Shares
Bank of America could also see its 50 day MA fall below its 200 day MA soon, resulting in what’s known as a bearish death cross.
Investors are concerned about the emerging death cross, as BAC is down 25% from its high for this year, which was in February.
Morgan Stanley’s Betsy Graseck, however, recommends that investors ignore such concerns and buy Bank of America shares at their current prices.
Graseck, citing an attractive valuation in early April of this year, upgraded BAC’s shares from “underweight” to “overweight”.
She acknowledges concerns that the Fed’s rate cuts and the yield curve changes could impact Bank of America’s net interest margin. However, she continues to believe in its long-term growth.
Morgan Stanley has set a price target of $56 on bank shares, which is a 50% increase from the current level.
Bank of America’s shares are currently paying a dividend yield of 2.84 percent, making them a great option for anyone looking to create a passive income stream amid continued market volatility.
The post Disney and BAC may soon form a cross of death: Here’s Why You Shouldn’t Sell Both could be updated as new information becomes available
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