After an impressive October, the stock market was poised for a strong holiday run. However, November has been anything but strong, as the general markets have been mostly lower over the past two weeks. As Thanksgiving approaches, the market is at a crossroads, faced with continuing to slide lower or putting in a higher low after a routine pullback. Short term, the markets are already oversold
and could be ready to bounce soon.
If the theory of an oversold bounce occurring holds up, then looking for stocks that have weathered the recent downturn would be a good approach. Sanderson Farms, Inc.
) is one such stock. The meat products stock has held up through the past few weeks as it consolidates an October breakout
. It has not only held above the $48-breakout level, but has also maintained an even tighter range the past few days, just above $50. SAFM could be close to clearing this range and may end up making a run at its all-time highs near $60. (For more, see The Anatomy Of Trading Breakouts
While HMS Holdings Corp
) has come down from its recent highs, it also has maintained itself above its recent breakout and the pullback has been orderly. HMSY started to turn back higher this week, although it may still have more consolidation
ahead of it. The mid $27s may be an area to focus on as a possible support level in case HMSY continues to drift back. (For more, see Peak-and-Trough Analysis
.) Pier 1 Imports, Inc.
) has been following a very similar pattern to HMSY. It cleared a resistance level
in late October as it broke above the $12.50 area. It continued to run up to near $14 before beginning to pullback. It has drifted back to its breakout level and could be finding support near this area. If the markets can find some support soon, it may lead to PIR ending its pullback and resuming the prior breakout.
Another stock that is consolidating in an orderly fashion, despite the recent weakness in the markets, is ANSYS, Inc. (Nasdaq:ANSS
). ANSS cleared a descending trendline in October as the markets roared to life, and it has held the majority of the breakout as the markets have regressed. ANSS is currently trading in a tight flag near all-time highs and is certainly worth watching on a break of the flag. The Bottom Line
It's always difficult to consider buying stocks during periods where the market is weak. However, by focusing on stocks that have maintained strength, traders can tilt the odds in their favor. While its certainly not a guarantee that the stocks will end up resuming their breakouts, the fact that they have an underlying bid holding them up is a positive. Ultimately, their fate likely lies in what the general markets do next. If the pattern of buying weakness in October resumes, then these stocks may be poised to resume their breakouts. If the markets continue to slide, then all bets are off the table. (For more, see Trade Broken Trendlines Without Going Broke
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At the time of writing, Joey Fundora did not own shares in any of the companies mentioned in this article.