mega cap is a designation for the largest companies in the investment universe as measured by market capitalization. This group of companies is often sought after by active traders due to the scale of operations and relative stability compared to their smaller counterparts. In this article, we’ll look at how many active traders are watching the state of the world’s largest companies and analyze where the charts suggest prices are heading over the coming weeks and months.
Key points to remember
- Analysis of the main holdings of exchange traded funds (ETFs) such as the iShares Global 100 ETF (IOO) is an effective strategy for identifying quality mega-cap stocks.
- Nearby support levels and break beyond influence resistance levels suggest that active traders will seek exposure to some of the biggest stocks in the world.
iShares Global 100 ETF (IOO)
Active traders who want exposure to the biggest companies in the world often think of the brands they encounter most regularly. Today, this method often leads to companies like Apple Inc. (AAPL) and Microsoft Corporation (MSFT), which we will detail below. These two companies are also the top holdings of the iShares Global 100 ETF (IOO), which leads to another method of identifying investment candidates that does not rely on subjective intuition. Reviewing holdings of ETFs such as IOO is a great method to quickly build a watchlist of premium global stocks.
Looking at the chart below, you can see that IOO price recently broke above the resistance of an influential trend line. The move above the 2020 highs suggests that the bulls are in control of the momentum. Technical analysts will likely look to buy on a retracement towards the 50-day support moving averagewhich is currently trading near the dotted trendline at $61.43.
StockCharts.com
Apple Inc. (AAPL)
As one of the most recognizable brands in the world, Apple rightly deserves its place as the top ETF IOO stock. Looking at the chart below, you can see that the stock price has recently topped a Triangle pattern and bounced off the influential support of its 50-day moving average. Recent price action suggests that the bulls are in control of the momentum and the next leg of an upward move may well begin. From a risk management perspective, stop loss orders will likely be placed below $124.50 or $115 to protect against a sudden shift in sentiment or underlying fundamentals.
StockCharts.com
Point
Mega Cap Stocks often wield significant influence in different industries due to the size and volume of goods and services sold in a given time period. Apple, for example, holds a market capitalization north of $2 trillion as of August 2020 due to continued strength in iPhone sales, while Amazon.com, Inc. (AMZN) has reached new heights in terms of success in retail operations and web services.
Microsoft Corporation (MSFT)
Microsoft is another mega-cap stock that will likely catch the attention of traders over the coming weeks. Looking at the chart below, you can see that the price is trading within the restricted range of a triangle pattern. Traders will use these dotted trend lines to determine the placement of buy and stop orders. Some traders may use the bullish chart patterns of other mega cap stocks as a leading indicator and buy near current levels in anticipation of a breakout.
StockCharts.com
The essential
Traders seeking exposure to world-famous stocks often rely on their own experience with popular brands. While this often leads to analysis of companies such as Apple and Microsoft, there are probably others that don’t come to mind so easily. Checking the holdings of funds such as the iShares Global 100 ETF, traders will find the big names they know, but also a host of others who may be just under the radar.
At the time of writing, Casey Murphy did not hold any positions in any of the assets mentioned.