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Stock Market Forecast: Three Stocks to Watch in the Week Ahead

Stock Market Forecast: Three Stocks to Watch in the Week Ahead

Peter Hanks, Strategist

Stock Market Price Outlook:

  • Stocks were largely unbothered by events in Washington on Wednesday, pushing to new heights
  • A Democrat sweep in Washington could allow for infrastructure and aid packages to receive approval where they previously may not have
  • Such policies could benefit a few areas of the market more than others, allowing potential for outperformance for investors with a keen eye

Stock Market Forecast: Three Stocks to Watch in the Week Ahead

The Dow Jones, Nasdaq 100, S&P 500 and even the Russell 2000 trade at record levels, despite recent events in Washington. Record valuations in the indices themselves can make it difficult to find potential bargains in the market, but that is not to say they do not exist altogether - particularly with shifts in the fundamental undercurrents in the economy on the horizon. To that end, a Democrat-controlled White House, Senate and House may open the door to larger stimulus packages and infrastructure bills than would have been possible with gridlock in Washington.

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This potential may work to benefit a few areas in the market if politicians should choose to pursue it. As a result, keen-eyed investors may be able to find select stocks that might benefit from such policy. That said, these three stocks and sectors might be worthy of consideration in the weeks ahead – although there is no guarantee they will outperform.

US Infrastructure ETF (IRA)

Perhaps the most direct method to gain exposure to the infrastructure theme is through the US Infrastructure ETF (IFRA). While the price chart reveals gains have already been established, there is little reason to suggest demand will evaporate from here. After all, few things are more encouraging than a new all-time high. Either way, maintaining close watch on this fund could help gauge investor’s expectations surrounding future infrastructure plans. Price action reveals potential support at $30 and $29.

IFRA ETF Price Chart: Daily Time Frame (December 2019 – January 2021)

infrastructure etf price chart

Exxon Mobil (XOM)

Exxon Mobil shares less of a direct correlation to infrastructure spending, but could be argued as a play on a general continuation of growing economic activity and rising crude oil prices. As the fossil fuel pushes to new highs in the post-pandemic world, XOM remains well beneath its February highs and even levels seen last summer. Thus, there may be reason to suggest the stock is primed for a continuation higher.

Exxon Mobil (XOM) Price Chart: Daily Time Frame (November 2019 – January 2021)

exxon mobil price chart, dow jones price chart

Aside from the fundamental argument that can be made, the XOM price chart reveals a looming golden cross formation and a recent break above December highs. Potential resistance does not exist until $47.50 and there may be room for topside continuation should it fail to keep price beneath.

Nevertheless, the longer-term outlook for crude oil and crude oil companies is precarious in my view, so XOM exposure may be better held in shorter increments. Evidently, Exxon Mobil may have a weaker fundamental argument than IFRA, but a more intriguing chart.

Boeing (BA)

Looking to another stock with technical potential, Boeing appears to be in the midst of a falling wedge. The pattern is often considered one of continuation, suggesting the airline manufacturer could break higher in the weeks ahead. Much like IFRA before it, BA boasts a recent golden cross pattern, indicating the longer-term outlook remains constructive.

boeing price chart

One consideration to be made is the fundamental foundation for exposure to the Chicago-based company. While not directly aligned to infrastructure or stimulus themes, Boeing is a key member of the industrial sector and has been recovering from stock-specific issues that saw its price plummet for months even prior to the pandemic.

Therefore, if the rotation from technology to industrial stocks continues for some time longer, Boeing could be a key beneficiary with encouraging technicals as an added bonus. Early resistance rests near $224.50 and $234.50. Follow @PeterHanksFX on Twitter for updates and analysis.

--Written by Peter Hanks, Strategist for DailyFX.com

Contact and follow Peter on Twitter @PeterHanksFX

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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