3 Santa Claus Rally Leaders to Ride into January

Momentum traders rejoice! A Santa Claus rally triumphantly manifested itself last week paving the way for a possible extended holiday run. The S&P 500 closed the shortened trading week on a festive three-day streak of green that all but erased three straight red sessions.

At the start of the Christmas week, the prospects for Santa’s arrival were dim. Stocks suffered a second straight high volume drop on Monday amid building pandemic concerns. By Thursday, however, the reindeer gathered, and Omicron fears diminished—and the S&P made a miraculous 3.4% recovery.

The charge was led by a mix of reopening plays and volatile tech names that have so often been in the driver seat during recent market rebounds. Fortunately, with presents unloaded there is room on the sleigh for traders to climb aboard. Christmas may be over, but these three Santa Claus rally winners appear have more magic ahead.

Will Lyft Stock Keep Going Up?

Lyft (NASDAQ: LYFT) posted big gains all four days last week in route to a 16% surge off its 52-week low. The ride hailing company was boosted by waning fears about Omicron’s impact and the potential for existing and new vaccines to be effective combatants. Along with some positive economic data, this gave new life to many depressed reopening plays.

The lift in Lyft shares was aided by an upgrade to outperform at sell-side research firm Fox Advisors which seemed to ignite the surge. Each of the last eight opinions offered by the Street have been bullish. Earlier this month J.P. Morgan lowered its price target to $67 but maintained an overweight rating that suggests more than 50% upside.

With the relative strength indicator (RSI) now back in the mid-60’s and a bullish hammer candlestick taking shape on the monthly chart, Lyft appears to have the wind at its back heading into the new year.

The fundamentals also look more bullish on the heels of the company’s surprise third quarter profit. If Lyft is able to endure the latest Covid challenges and continue to increase rider volumes, its stock could be in for a joy ride to kick off the new year.

Is Carnival Stock a Good Momentum Play?

Carnival (NYSE: CCL) was also up 16% last week benefitting from favorable sentiment towards reopening stocks. The cruise line operator is on pace for its highest trading volume since November 2020 which ignited the latest leg in the recovery rally. The RSI reading of 74 is also unusually bullish and the highest it has been since early June.

Whether this momentum trade continues to cruise higher will largely hinge on the day-to-day pandemic headlines. But Carnival’s recent fourth-quarter update could also help put the wind at its back. Although management noted a wider than expected loss for the period, it said it expects its full fleet to be back on the friendly seas by Spring 2022. Of course, the company remains at the mercy of potential government restrictions, but with advanced bookings and customer deposits on the rise, Carnival may be a tough ship to slow.

There is much debate around whether Carnival stock is a great value or value trap. Analysts are forecasting earnings per share (EPS) of $1.89 next year which makes the stock inexpensive at 11x. Uncertainty will keep swirling around the cruise line industry, but as it returns to health, Carnival’s improving demand trends and financials point to smoother water ahead.

Is Micron a Good Value Stock?

Micron Technology (NASDAQ: MU) delivered a knockout earnings report Tuesday that not only resulted in a 14% weekly gain but revitalized the entire semiconductor space. The nation’s leading memory chip company posted a 33% jump in fiscal Q1 revenue and a 59% surge in adjusted EPS thanks to strong broad-based demand for its DRAM, NAND, and NOR chips. This prompted management to raise its full year outlook sending Micron shares on a high volume run to within $1.17 of its 52-week high.

As the semiconductor industry’s supply chain woes subside, Micron should be in the driver’s seat to emerge one of the space’s biggest winners. That’s because underlying demand is on the rise from computing, consumer electronics, industrial, and telecom customers alike. Demand for smartphone mobile memory chips, data center solutions, and enterprise storage have been particularly strong with the digital transformation taking hold across those industries.

Despite the stock’s 37% surge since the end of October, analysts are bullish on Micron’s growth prospects. The vast majority called the stock a buy in the wake of the Q1 report and many see at least 20% more upside. Rosenblatt Securities is a clear outlier with a wildly optimistic $165 price target.

With Wall Street playing catch up with its 2022 earnings forecast for Micron, the latest consensus is up to $11.51. So, at 8x forward earnings and a reinstated quarterly dividend, it’s easy to see why value investors are putting their chips on this chipmaker.