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 by active traders due to the breadth of operations and relative stability when compared to smaller counterparts. In this article, we will look at how many active traders monitor the state of the world's largest companies and analyze where the charts suggest prices are headed over the weeks and months ahead.
- Analyzing the top 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 breaks beyond influential resistance levels are suggesting that active traders will be looking to gain exposure to some of the world's largest equities.
iShares Global 100 ETF (IOO)
Active traders who are interested in gaining exposure to the world's largest companies often think of brands that they most regularly encounter. Today, this method often leads to companies like Apple Inc. (AAPL) and Microsoft Corporation (MSFT), which we will take a closer look at below. These two companies are also top holdings of the iShares Global 100 ETF (IOO), which leads to another method for identifying investment candidates that doesn't rely on subjective intuition. Looking at the holdings of ETFs such as IOO is a great method for quickly creating a watchlist of top-quality global equities.
Looking at the chart below, you can see that the price of IOO has recently moved beyond the resistance of an influential trendline. The move above the highs of 2020 suggest that the bulls are in control of the momentum. Followers of technical analysis will likely look to buy on a retracement toward the support of the 50-day moving average, which is currently trading near the dotted trendline at $61.43.
Apple Inc. (AAPL)
As one of world's most recognizable brands, Apple rightly earns its spot as the top holding of the IOO ETF. Looking at the chart below, you can see that the price of the stock has recently broken out of a triangle pattern and has bounced off the influential support of its 50-day moving average. Recent price action suggests that bulls are in control of the momentum and that the next leg of a move higher could just be getting underway. 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.
Mega-cap stocks often wield significant influence in different industries due to the size and volume of goods and services sold during a given time period. Apple, for instance, holds a market cap north of $2 trillion as of August 2020 owing to continued strength in iPhone sales, whereas Amazon.com, Inc. (AMZN) reached new highs on the success of retail operations and web services.
Microsoft Corporation (MSFT)
Another mega-cap stock that will likely capture the attention of traders over the weeks ahead is Microsoft. Looking at the chart below, you can see that the price is trading within a confined range of a triangle pattern. Traders will use these dotted trendlines when determining the placement of buy and stop orders. Some traders may use the bullish chart patterns from other mega-cap stocks as a leading indicator and buy near current levels in anticipation of a breakout.
The Bottom Line
Traders looking to gain exposure to world-leading equities often rely on their own experiences with popular brands. While this often leads to analyzing companies such as Apple and Microsoft, there are likely others that do not quite as easily come to mind. By checking out the holdings of funds such as the iShares Global 100 ETF, traders will find the top names they know but also a host of others that may be just under the radar.
At the time of writing, Casey Murphy did not own a position in any of the assets mentioned.