Having thrown off the year’s early market turmoil, the Dow Jones Industrial Average, through fits and starts, is slowly approaching its all-time record high. Needing only the slightest boost to push it above that level, Chris Verrone of Strategas Research Partners told CNBC’s Trading Nation on Tuesday that the strength to propel the Dow above and beyond its old record is likely to come from three big names: J.P. Morgan Chase & Co. (JPM), Apple Inc. (AAPL) and The Home Depot Inc. (HD).
|Home Depot||+ 5.69%|
Just 5% below its all-time high of 26,616.71 reached at the end of January of this year, the blue chip index should get some support from J.P. Morgan, Apple and Home Depot, all of which have strong upside right now, according to Verrone’s technical analysis. (To read more, see: Why KISS Rocker Gene Simmons Sees Dow 30,000.)
Checking Support and Moving Upward
Pointing to a chart of J.P. Morgan’s share price going all the way back to late 2015, Verrone points to three separate instances during that period where, “every time it [the price] comes right back to support, it checks support, and then ultimately it resumes higher.” The momentum pushing the bank’s stock higher will also help nudge the Dow closer to its current goal.
The same analysis fits Home Depot’s story as well, with the stock price finding support at various times over the past few years before continuing to move higher. Over the past six months a lower base has formed, but Verrone sees the stock now “starting to emerge” from that base.
Apple, which hit an intraday record high last week, is steadily approaching a $1 trillion market cap, a level no publicly traded company has yet reached. Over the last month the stock had been running into a resistance level around $190, but broke out above that level earlier this month. Verrone indicated that he thinks it’s “on its way to $225, maybe $230,” according to CNBC. (To read more, see: Apple Traders Pile In To Bet on 12% Gain.)
On the fundamental side, forecasted earnings look strong for all three companies given that they are from three very different sectors. Over the next five years, JPMorgan is expected to grow earnings at an average annual rate of 6.67%, Home Depot at a rate of 14.13%, and Apple at a rate of 10.64%, according to Nasdaq. Currently, JPMorgan and Apple are trading at forward price-to-earnings multiples of 11.20 and 14.39, respectively, below the S&P 500’s multiple of 17.29. Home Depot trades at a forward P/E ratio of 19.70.