Bernie Schaeffer — editor of Schaeffer's Investment Research — has been a leading authority in stock, options and trading education for 40 years. Here, he updates his 2021 Top Pick, Charles Schwab (SCHW), which has gained 40% so far this year.
With SCHW trading in the low-50’s as 2020 had drawn to a close, I concluded my comments in this space as follows: “The May 2018 all-time high at $60 is already within sights — with additional upside potential to the $70 area as the year progresses.”
See also: Top Picks Mid-Year Updates: Deluxe Corporation
My bullish assessment has proven too conservative, as the shares soon embarked upon a “take no prisoners” rally which peaked in early June just above $76.
While our equity analysis and price projections are deeply founded in technical and sentiment analysis, we believe the fact that SCHW added 3.2 million new brokerage account in Q1 2021 — more new accounts than all of 2020 — added fuel to the already bullish technicals.
We suggest that the retail investor boom is just getting started, and in this regard, we turn back the clock and note another price peak in SCHW — this one at $49.26 in April 1999, back in the days of the so-called “dot-com boom” — a stock trading craze that never approached the level of individual investor market participation that we now routinely experience.
True to this year’s form, the pullback by SCHW since the June peak has been quite modest. And while we do see the potential for a 10% pullback from the highs to the $68-$69 area (further buttressed by support at the steadily rising 50-day and 80-day moving averages), we expect more in the way of all-time high action from SCHW in the second half.
See also: Top Picks Mid-Year Updates: Avangrid
Our first upside target is in the $80-area, at which point SCHW would be sporting a market capitalization of about $150 billion and a year-to-date gain of 50%.
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