No time like the present.
That adage rang true for Bill Baruch of Blue Line Capital on Friday as stocks continued to fall in Wall Street’s worst week since the depths of the 2008 financial crisis, fueled by mounting worries over the global coronavirus outbreak.
“Nothing to argue about here: This is a bloodbath, but it’s not when you panic,” Baruch, the president and founder of Blue Line Capital and Blue Line Futures, told CNBC’s “Trading Nation” on Friday. “This is when you go shopping.”
With the Dow Jones Industrial Average finishing the week down more than 12% at 25,409, Baruch flagged a floor of support not too far below those suppressed levels on the index’s chart.
“Really, the market ramped up back in 2016, so, let’s use [the] February 2016 low as a trend line,” Baruch said. “There’s a good trend line right above 24,000 in the Dow. I want to be buying into that.”
When it came to picking Dow components, all 30 of which were in the red for the week, the technical analyst went mostly for the high fliers.
“Let’s start with Microsoft. It’s still out above the 200-day moving average. It’s coming in there pretty [well]. I want to be buying Microsoft into that,” he said.
Microsoft ended trading up nearly 2.5% on Friday at $162.01, still far off its 200-day moving average at just above $145. The stock has shed $193 billion in market cap in the past seven trading sessions, including Friday’s.
“Now, you have Apple,” Baruch said. “Apple’s coming into the 200-day moving average. I want to be buying Apple into that.”
“Apple also is coming into a breakout area from that 2018 [top],” he said. “In fact, Apple went from the 2018 sell-off and … stalled perfectly at that 324 [level]. Coming into this, this is going to be a very technically driven chart. I like buying Apple into that.”
Apple shares ended trading practically flat on Friday at $273.36. The stock’s 200-day moving average comes into play just above the $240 level.
Baruch’s final pick was the stock of energy giant Chevron, a notable shift for the trader after a long period of staying away from oil and gas stocks.
“I’ve been a dog on energy [stocks]. I have not liked them at all, … but now I am paying attention,” Baruch said. “Chevron has a very constructive channel or trend line from 2003. We’re coming into that. I think there’s some really good support down near 80 bucks. I think, if you look and even buy here down at 80 bucks in Chevron, somewhere in this 5% range from where we are right now, you’re going to like it when you look six months to a year out.”
Gina Sanchez, the founder and CEO of Chantico Global, said in the same “Trading Nation” interview that the market still lacked the information it needed to make a sustained rebound, calling the recent moves “all over the place.”
“The market was overvalued going into this panic,” she said. “I do think that this is a catalyst to rethink valuations.”
With sectors like technology trading at nearly 25 times price-to-earnings multiples as opposed to what Chantico considers to be fair value of 17 to 18 times forward earnings, “that’s still a lot of froth left in the market,” Sanchez said.
“You have to be buying because you love the fundamental story, not because you’re seeing sort of a technical moment, because there’s still a lot more information that we need to process,” including whether the virus can be contained and if the Federal Reserve will step in to help stem the damage, she said.
Sanchez’s recommendations for investors in this environment were to “get more conservative and be overweight value relative to growth” because of value’s long-term underperformance relative to its momentum-driven counterpart.
“There’s still a lot of pent-up value locked up in that segment of the market because people have been overpaying for growth at the very end of a bull cycle,” she said. “So, those were our biggest recommendations. So far, they’re playing out.”
Her final piece of advice? “When you go looking, … you have to consider the long-term fundamentals because they will resume.”
Disclosure: Baruch owns shares of Microsoft, Apple and Chevron.