News of next month's signing ceremony for Phase 1 of the U.S.–China trade pact is moving things closer to finalization. As experts sort through the 86-page trade document, clear-cut winners and losers are emerging as we move into 2020.
Among some of the biggest winners are expected to be agricultural companies that'll benefit from China's agreement to purchase $40-50 billion in U.S. agricultural goods. Analysts think exports in this area could jump between 50% and 100% in 2020 and, with China still reeling from a swine fever outbreak, those numbers could be even higher.
DAILY CHART OF SANDERSON FARMS, INC. (SAFM)
U.S. chicken giant Sanderson Farms (SAFM) was the first to kickstart exports to China by sending its first container earlier this month, with more being sent this past week. The company expects full tariffs to be lifted in 2-3 months, which will only continue to boost sales.
SAFM broke out of a 1-month base on volume last week after the company reported sales that were ahead of estimates. The move put the stock into an uptrend, with the RSI and MACD both positive. The weekly chart for this stock is even more positive, as recent action has pushed this stock out of a 2-year base.
"I've seen first-hand from my many years of working with William O'Neil & Co. that, historically, the longer a base breakout, the longer the advance out of that base."
In addition to agricultural products, Smartphones and Consumer Electronics goods will benefit from the Phase 1 deal, as the U.S. canceled plans to impose fresh tariffs on these products while also slashing existing tariff's in half.
While many Tech companies will benefit from this news, Apple (AAPL) is the most widely cited given their dominance in the smartphone space. The stock is in a long-term uptrend and poised for more upside; however, AAPL is due a pullback given its strong rally over the past 3 months. This stock has already experienced a long-term base breakout on its monthly chart - putting it in a position for much more upside.
Semiconductor stocks are another area of Tech to pay attention to. Most of these stocks derive a good portion of their revenues from China; any hint of a truce between the U.S. and China will give a boost to the current leadership status of Semiconductor stocks.
DAILY CHART OF INPHI CORP. (IPHI)
While not all stocks in this group are poised to outperform, Inphi (IPHI) is a Small Cap Semi stock with high growth prospects that's poised to break out of a 2-month base. The stock has been consolidating after reporting very strong earnings in late October as the company is benefiting from rising demand for their cloud services, AI and Big Data-related solutions.
In addition to raised guidance for future growth, IPHI has seen 85% average EPS growth over the past three years. A break above $78 on volume would be quite bullish for the stock.
DAILY CHART OF JP MORGAN CHASE & CO. (JPM)
One of the biggest breakthroughs of the Phase 1 trade deal is that China is finally allowing U.S. banks and credit card companies to enter China on their own without having to partner with a local Chinese company. Large American bank JP Morgan Chase (JPM) already started laying the groundwork this past summer in anticipation of this announcement.
JPM had strong growth prospects for its U.S. banking and credit divisions going into the news; the recent trade deal announcement has analysts raising guidance even more for this year and next. The 2.6%-yielder is poised for further near and longer-term upside.
The areas mentioned above are only a few that are expected to benefit from renewed relations between the U.S. and China, as select Industrial stocks are coming to life following a period of lackluster trade. If you'd like to be alerted to high-quality stocks as they enter buy zones in these newer areas, I urge you to trial my bi-weekly MEM Edge Report for a nominal fee.
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I hope everyone is having a wonderful holiday season!
Warmly,
Mary Ellen McGonagle,
