A top strategist at Fundstrat believes the next leg of the stock market’s rally will be fueled by renewed investor optimism in the Magnificent 7 (Mag 7) stocks.
In a new Fox Business technical analysis session, Fundstrat head of technical strategy Mark Newton says he’s keeping a close watch on the MAGS ETF chart, which tracks the performance of large-cap tech names including Alphabet, Amazon, Apple, Broadcom, Meta Platforms, Microsoft and Nvidia.
According to Newton, MAGS has broken out of a recent consolidation phase and is now trading at all-time high levels to resume its uptrend.
“We’ve seen a little bit of bifurcation and rotation within the Mag 7… The former laggards of this year, ones like Alphabet and Tesla, are now starting to lead. And then the former leaders are now, we’re seeing the Netflixes of the world, of course, and Microsoft and Amazon haven’t done as well. But yet, they’re not really breaking down. They’ve just gone sideways.
And we’ve seen, literally, this one-month sideways pattern was just broken back out to the upside last Friday, so. Of all this talk about, oh, the US is underperforming, that was all because of large-cap technology. Now that’s starting to come back, so that’s a good sign.”
Looking at Shopify (SHOP), the technical analyst says that he sees the stock generating a lot of bullish momentum after rallying to a fresh all-time high at $176.
“I love it. You know why? Because it literally just broke out to all-time highs as of last week. So it’s above 170. If you look at a longer-term perspective, you’re above that now. I think it gets up to 210.”
He added that traders should stay focused on relative strength rather than trying to time pullbacks.
“Investors always try to buy dips. That’s not the way you want to approach it. You want to stick with momentum. Momentum has been the number one factor over the last 20 years in the stock market. You have to stick with what’s working and continue to add on strength.”
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