Half Of S&P 500 Stocks Still Below 200-Day Average, Ignoring Covid-Like Rally: 10 Bargain Plays For Latecomer Bulls

Zinger Key Points
  • S&P 500 rallies strongly, but nearly half its stocks remain below key 200-day moving average.
  • S&P 500 marked the strongest 17-day surge since November 2020.

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 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. EPAM, Citigroup Inc. C, Quest Diagnostic Incorporated DGX, and Agilent Technologies Inc. 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.

NameLast Price% Distance vs. (200-Day Avg.)
SolarEdge Technologies, Inc. SEDG78.87-64.91%
Illumina, Inc. ILMN95.72-46.74%
FMC Corporation FMC53.11-44.98%
Enphase Energy, Inc. ENPH98.16-37.97%
Paycom Software, Inc. PAYC178.38-37.31%
The Estée Lauder Companies Inc. EL120.10-36.44%
Albemarle Corporation ALB125.97-36.37%
Moderna, Inc. MRNA77.42-35.96%
Align Technology, Inc. ALGN215.07-30.99%
Walgreens Boots Alliance, Inc. WBA20.87-28.27%

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.

Read now: Magnificent 7 Take Center Stage In Hedge Fund Portfolios: Analysts Warn Of Extreme Concentration

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