4 Stocks Showing Strength
As the markets continue to show some near-term weakness as they correct their recent rally, there are many stocks quietly building on healthy bases. While it may be tempting to look for former leaders trading at a so called "discount", it's often better to stick with the stocks that continue to show support from institutions. One simple way to screen for these types of stocks is to find stocks in a consolidation while holding above their prior bases. While there are no guarantees they will continue to trade higher, stocks meeting this simple criteria are showing that there is an underlying bid supporting them.
IN PICTURES: 7 Tools Of The Trade
Corporate Executive Board Company (NYSE:EXBD ), for example, broke out of a wide base in early November. It is clear to see that the $33 level was holding it back on several occasions. Once EXBD cleared this level, it turned into a support area. While EXBD has not shown any follow-through since the breakout, it has held above its prior base during a period of market weakness. Traders should monitor the recent low near $32.50; a drop below this area would serve to warn of a breakout failure. (For more, check out Support And Resistance Reversals.)
Acacia Research Corporation (Nasdaq:ACTG ) cleared a base in September and has not looked back since. It had a good follow-through, rallying up through $22 per share. It then had a breakaway gap in late October and has yet to retrace into the gap. It is now flagging in a tight range, and showing very little selling despite the recent weakness in the markets. This may bode well for the near future, especially if the markets can find some support.
Cummins (NYSE:CMI ) is another stock that has simply traded sideways through the recent market weakness. CMI cleared a longer base in July, but the resulting breakout turned into further consolidation. However, CMI started acting better once it cleared resistance above $82. Traders should monitor the current range and be ready for a break above $95. This would take CMI to new all-time highs and possibly begin a new trend move higher. (For more, see The Anatomy Of Trading Breakouts.)
Tractor Supply Company (Nasdaq:TSCO ) is another stock that has been relatively unfazed by the recent weakness in the markets. TSCO cleared a base in September and has distanced itself from prior resistance near $36. TSCO held above its base on its first pullback, and has settled into a clear pattern of higher highs and higher lows. TSCO is currently trading in a tight range between $40 and $42 and should be watched for a move out of this range.
Bottom Line
While these stocks would likely deteriorate if the markets continue to show weakness, they have shown good relative strength. However, if the markets find some support in this area and turn back higher, stocks that remain in a healthy uptrend are likely to continue their breakouts. The markets are entering a seasonally bullish period and the chances are good for a period of strength as we head into the end of the year. The key for traders is to remain patient as the markets continue to take a breather, and then be ready to act on the stocks that have shown strong institutional support.
Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!
At the time of writing, Joey Fundora did not own shares in any of the companies mentioned in this article.
IN PICTURES: 7 Tools Of The Trade
Corporate Executive Board Company (NYSE:EXBD ), for example, broke out of a wide base in early November. It is clear to see that the $33 level was holding it back on several occasions. Once EXBD cleared this level, it turned into a support area. While EXBD has not shown any follow-through since the breakout, it has held above its prior base during a period of market weakness. Traders should monitor the recent low near $32.50; a drop below this area would serve to warn of a breakout failure. (For more, check out Support And Resistance Reversals.)
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| Source: StockCharts.com |
Acacia Research Corporation (Nasdaq:ACTG ) cleared a base in September and has not looked back since. It had a good follow-through, rallying up through $22 per share. It then had a breakaway gap in late October and has yet to retrace into the gap. It is now flagging in a tight range, and showing very little selling despite the recent weakness in the markets. This may bode well for the near future, especially if the markets can find some support.
 |
| Source: StockCharts.com |
Cummins (NYSE:CMI ) is another stock that has simply traded sideways through the recent market weakness. CMI cleared a longer base in July, but the resulting breakout turned into further consolidation. However, CMI started acting better once it cleared resistance above $82. Traders should monitor the current range and be ready for a break above $95. This would take CMI to new all-time highs and possibly begin a new trend move higher. (For more, see The Anatomy Of Trading Breakouts.)
 |
| Source: StockCharts.com |
Tractor Supply Company (Nasdaq:TSCO ) is another stock that has been relatively unfazed by the recent weakness in the markets. TSCO cleared a base in September and has distanced itself from prior resistance near $36. TSCO held above its base on its first pullback, and has settled into a clear pattern of higher highs and higher lows. TSCO is currently trading in a tight range between $40 and $42 and should be watched for a move out of this range.
 |
| Source: StockCharts.com |
Bottom Line
While these stocks would likely deteriorate if the markets continue to show weakness, they have shown good relative strength. However, if the markets find some support in this area and turn back higher, stocks that remain in a healthy uptrend are likely to continue their breakouts. The markets are entering a seasonally bullish period and the chances are good for a period of strength as we head into the end of the year. The key for traders is to remain patient as the markets continue to take a breather, and then be ready to act on the stocks that have shown strong institutional support.
Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!
At the time of writing, Joey Fundora did not own shares in any of the companies mentioned in this article.
by
Joey Fundora
Joey Fundora is an independent trader located in South Florida. Joey focuses on using technical analysis techniques to uncover supply and demand imbalances in equities. To see more of his work, visit his site on Stock Chart Analysis.
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