Strong Stocks for a Weak Market - Investment Ideas

 

Face it folks, this market is tough. The S&P 500, NASDAQ and Russell 2000 have been taking their lumps as of late. A fierce drop off in oil prices over the last few days really isn’t helping either. It’s been miserable for everyone except the makers of your favorite antacid. Trust me, I’ve been chewing TUMS like Tic-Tacs.

While the market feels like it’s been suffering, the pain really hasn’t been all that bad when you put it in perspective. I use monthly pivot points as a way to gauge just how volatile a month really has been. These pivots are based on the prior month’s trading range. By using the previous month as a point of reference, you can compare the current month’s activity with how much movement we saw last month.

Carving Out Lows

With the S&P 500 carving out a low at 2,046.17 the market hasn’t even gotten down to the first level of monthly support which currently sits at 2,036.33. The S&P 500 hits the first level of support over 37% of the time. It’s not until the second level of support that things occur more rarely. The second level is hit only 13% of the time. That level currently sits at 2,009.55. The last time the market hit this level was December 2014.

The most volatile downside month we’ve had in the last year of course is October 2014. During this violent market correction the market came all the way down to touch the third level of support. That has only happened in about 3% of months since 1960. Before October 2014, the last time the market saw that level was August 2011.

Buy Strength 

The answer to making money in this market is to look for the cream to rise to the top. Here you want to stick with the script and you’re likely to find fantastic stock ideas on stocks that have sold off a little bit. This way you get an even better deal than you would in any other market. Often times the best trades are initiated during periods of time like this.

Here I’ve put together a quick screen to find the strongest stocks in this market. I’m looking for stocks that are Zacks Rank #1 (Strong Buy) or Zacks Rank #2 (Buy) stocks which have a Momentum Style Score of “B” or “A” and are at or near 52-week highs. These give me the strongest stocks in a weak market.

Tempur Sealy (TPX) – Zacks Rank #1 (Strong Buy) Momentum “A”

Tempur Sealy International, Inc. is involved in the development, manufacturing and marketing of bedding products primarily in North America and internationally. It provides mattresses, adjustable bases, pillows and other sleep and relaxation products. The company's brand portfolio includes Tempur(R), Tempur-Pedic(R), Sealy(R), Sealy Posturepedic(R), Optimum(TM) and Stearns & Foster(R). Tempur Sealy International, Inc., formerly known as Tempur-Pedic International Inc., is headquartered in Lexington, Kentucky.

Shares of TPX have taken the slow and steady approach. I suppose that’s what you’d expect from a company that manufactures mattresses. It’s not exactly the sexiest business on Earth to talk about. But the stock has been on a steady incline coupled with average volume for the last several months. Currently, a positively sloped 21-day moving average serves as short term support for shares in a bullish uptrend.

 

Medicines Co (MDCO) – Zacks Rank #2 (Buy) Momentum “A”

Medicines Company acquires, develops and commercializes biopharmaceutical products in late stages of development. U.S. Food and Drug Administration intends to approve its first product, Angiomax, for use in the treatment of patients with unstable angina undergoing coronary balloon angioplasty. The company is also developing Angiomax for additional potential applications for use in the treatment of ischemic heart disease, a condition which occurs when organs receive an inadequate supply of oxygen as a result of decreased blood flow.

MDCO shares were trapped in range bound trading for much of 2015. That was until some big volume over the last few days pushed it through topside resistance. This could be beginning of a breakout that takes the stock to all-time highs again and again.

 

Interactive Brokers (IBKR) – Zacks Rank #2 (Buy) Momentum “B”

NTERACTIVE BROKERS is an automated global electronic market maker and broker specializing in routing orders and executing and processing trades in securities, futures and foreign exchange instruments on more than 70 electronic exchanges and trading venues around the world. As a market maker, they provide liquidity at these marketplaces and, as a broker, they provide professional traders and investors with direct access to stocks, options, futures, forex and bonds from a single IB Universal AccountSM.

Shares of IBKR have been rallying since a big volume breakout above the 21 day moving average below $34 in mid-April. From there, shares have jumped to fresh highs above $45. Even with the market selling off, strong buying has pushed the stock through previous resistance levels again and again. The increased volumes are confirming strong institutional buying.

 

Bottom Line

A weak market should excite you, not frighten you. By using the power of the Zacks Rank you can be confident when you step in and buy while everyone else heads for the exits.

Be sure to click FOLLOW THE AUTHOR above to stay on top of the latest momentum stock breakouts here with Zacks.com and Momentum Strategist David Bartosiak. 

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TEMPUR SEALY (TPX): Free Stock Analysis Report
 
MEDICINES CO (MDCO): Free Stock Analysis Report
 
INTERACTIVE BRK (IBKR): Free Stock Analysis Report
 
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