Mega-cap performance has taken a steep dive in this bear market, with iconic giants at the core of our capitalist society getting ripped apart like tiny paper dolls. General Electric's (GE) - Get General Electric Company (GE) Report incredible selloff to a multi-decade low highlights the apocalyptic damage as well as the challenges we face in rebuilding the American brand across the world.
But not all of the biggest blue-chip stocks have been pulverized in this historic decline. A select few have been weathering this perfect storm and should emerge stronger than ever once the world economy stabilizes. Let's try to identify these resilient issues so we know what to buy for our longer-term portfolios after the tide finally turns.
I sorted my database of the market's most liquid issues by market cap and relative strength. Then I reviewed the long-term patterns of the few issues that ranked high in both categories, looking for strong bases, good accumulation and limited technical damage. The following five issues stood out as potential winners in the mega-cap space.
sports a market cap of $27 billion and is the only tech stock to make this narrowly defined list of leadership issues. The stock rallied to an all-time high back in 1999 and tested that level in November 2007, right at the top of the last bull market. It then dropped sharply, hitting a two-year low at $34.68 in November.
Price then surged off the deep low in a two-wave pattern, reaching a four-month high in early February and settling on top of the 200-day moving average. It's been moving sideways since that time, apparently unaffected by broad selling pressure. However, with major resistance just overhead, a pullback into the low $50s is now likely.
is an $80 billion drug company, it's been off the radar of many investors in the last few years. The stock broke out above five-year resistance at $54 in early 2007 and spiked up to $60 before settling into a choppy sideways pattern that's still in place almost two years later.
A holding pattern is a good thing in a bad market because it shows the failure of sellers to take control. Look at price action in the last three months below $50. Every time the issue has been pounded through that level, new buyers have emerged and lifted it back above support. This is a generally bullish sign the stock will move higher once the market stabilizes.
has a market cap of $60 billion, which translates into a ton of hamburger sales around the world. Clearly, no other company reflects the uniquely American export of fast food like this omnipotent icon. It's also in a perfect position to survive tough timesn because a burger-and-fries combo is an affordable meal for all economic brackets.
The stock pulled back in August from an all-time high at $67. It dropped into the mid-$40s during the market crash and then leaped higher. Realistically, there aren't enough buyers in the mix right now to lift this issue to a new high, so it could chop sideways for another year, at least. But that isn't so bad, compared to its blue-chip peers.
is the world's second-biggest biotech, with a $60 billion market cap. It's traveled a difficult road in recent years, stalling out after hitting an all-time high at $100 in 2005. But instead of selling off during this bear market, the stock has held up well and moved sideways in a broad consolidation pattern, with support in the mid-$60s.
Ironically, this go-nowhere action has turned the stock from laggard into leader, which could pay off in a stronger market environment. For now, all we can do is watch the six-month pattern and look for a rally over resistance in the lower $60s. That uptick might portend a larger-scale breakout over multiyear resistance at the three-year high.
has grown into a $43 billion company in recent years as the agricultural tech revolution sweeps the globe. The stock charged higher in powerful uptrend during this period, topping out at $146 in June 2008. The subsequent correction has been violent, hurling the stock down to just $60 at the November low.
This issue is well positioned because it's trading high in its 2003-to-2008 range, despite the steep decline. Price action since November shows a broad basing pattern, with support in the $60s and resistance along a falling trend line that's now in the mid-$80s. A rally over that level could draw in fresh buyers and lift price over $100.
Alan Farley provides daily stock picks and commentary with his "Daily Swing Trade" newsletter.
At the time of publication, Farley had no positions in the stocks mentioned, although holdings can change at any time.
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