The markets have been under constant pressure over the past several weeks, but if they can successfully form a low in this area, it could open the door to a return to a move higher. There are several stocks that have held up quite well through the recent pullback in the markets and traders may be better served focusing on those. Stocks that have held up well in weakness often continue to outperform once conditions improve.
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One stock that has held up amazingly well is OSI Systems (Nasdaq:OSIS). OSIS broke out of a base just as the general markets were topping out in February and has managed to remain above this base for the past few weeks. While it hasn't followed through to a huge breakout, the stock is sitting near all-time highs and has not been adversely impacted by the recent weakness. If the markets can stabilize here, it could help propel OSIS to new highs. (For more, see 5 Strong Stocks Poised For A Breakout.)
Sohu.com (Nasdaq:SOHU) is another stock that is pretty close to all-time highs. It cleared its base in early February as well, but was impacted by the market weakness later in the month. However, SOHU held up near the top of its prior base, cementing the $79 area as support. Traders can key off this level as SOHU attempts to resume its breakout.
Pharmasset (Nasdaq:VRUS) also recently cleared a base on its way to all-time highs, despite weakness in the general markets. Volume was high on the breakout and VRUS rallied nearly 40% in a couple of days. VRUS has given up some of the recent breakout, but the pullback is taking the appearance of a bull flag, which could be considered a healthy consolidation. While it likely won't pull back that far, the $50 level would be critical for VRUS longs to defend.
Tyler Technologies (NYSE:TYL) recently broke out of a base as well and it accomplished this while the general markets were pulling back. It too has now pulled back to test its breakout area for support; if the markets can gain some traction soon, it could help TYL continue its breakout. Interestingly enough, TYL is also at all-time highs.
The Bottom Line
It's interesting that despite not specifically screening for it, all of these stocks are near all-time highs. This is the ultimate show of strength, especially in a weak market. Stocks trading near all-time highs will have very few underwater traders unless they are shorting the stock. If a stock can hold near all-time highs during market weakness, it stands to benefit from a strong market as well. The general markets still have some work ahead of them if they are to end the recent pullback. If they can stabilize and move higher from their current levels, the stocks above stand to be major beneficiaries. (For more, see The Anatomy Of Trading Breakouts.)
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At the time of writing, Joey Fundora did not own shares in any of the companies mentioned in this article.