Gains of 27.66% the past three months for shares of Starbucks Corporation (SBUX), 15.78% for Walmart Inc. (WMT) and 6.51% for The Coca-Cola Company (KO) tell a story of unusual bullish trading activity accompanying the moves. The main criteria we look for when betting on upside in a stock are improving fundamentals, leading technicals and bullish trading activity in the shares. The true tell on the near-term trajectory of the stock lies in the trading activity of the stock.
Since August, shares of Starbucks, Walmart and Coca-Cola have increased in price alongside an increase in volume. This can be indicative of smart money accumulating shares. The bottom line here is that the manner in which a stock trades can oftentimes alert you to the forward fundamental picture more so than simply looking at a company's financials alone.
For Mapsignals, the strongest indicator of positive price momentum is obtained by measuring potential institutional buying in the shares. Since August, Starbucks stock has logged eight of these rare signals (see chart). We like to see continual bullish activity in the shares alongside solid forward fundamentals and dividends, as this indicates that demand for the stock should increase over time.
Mapsignals' goal is to identify tomorrow's top stocks today. We're basically looking for outlier companies with healthy fundamentals accompanied by outsized, unusual institutional trading activity. By studying these data points, we can make an educated guess as to which equities institutions are trafficking in and marry this information with fundamentally sound companies. We want the odds on our side when looking for the highest-quality stocks.
Just to show you graphically what our unusual trading activity signal looks like, have a look at all of the UI signals that Starbucks stock has made over the past year:
Now take a look at the same activity being seen in shares of Walmart and Coca-Cola:
In the chart below, Walmart shares took out August highs. Next up will be the January highs:
In the chart below, Coca-Cola stock broke out to a new 52-week high on big accumulation:
Starbucks, Walmart and Coca-Cola shares are outperforming technically and have a history of strong fundamentals while showing bullish institutional momentum in 2018. We believe that the current level for the shares is in position for further upside. All of this points to further long-term bullish action for these stocks.
The Bottom Line
Starbucks, Walmart and Coca-Cola shares represent potential buying opportunities for the long-term investor. Given the dividend growth and multiple unusual accumulation signals, these stocks could be worth a spot in an income-oriented portfolio.
To learn more about Mapsignals’ institutional signals, please visit our "About Us" page.
Disclosure: The author holds positions in Starbucks and Walmart, and no position in Coca-Cola, at the time of publication.