3 Top-Ranked Stocks on the Verge of a Breakout
For those seeking to capitalize on the relentless upward trend of this market, momentum trading presents an excellent opportunity. By simply focusing on stocks that are on the rise, there is a high likelihood that they will continue their ascent. Momentum trading is not just a catchy phrase; it is a well-researched and widely implemented trading concept that even the largest funds in the world utilize to their advantage.
To further enhance the outcomes of your momentum trading strategy, it is beneficial to prioritize stocks with high Zacks Ranks. Concentrating on stocks with a Zacks Rank #1 (Strong Buy) significantly increases your chances of selecting a winner. This is due to analysts upgrading their earnings expectations, which often prompts large funds to invest in these stocks based on the information provided.
To enhance trading odds even further, investors can also consider buying stocks that exhibit high probability chart patterns. By utilizing technical chart patterns, traders can establish precise entry and exit signals. This disciplined approach helps traders avoid questionable trades and positions them in trades with favorable risk-reward ratios, maximizing their potential returns.
Salesforce CRM, PGT Innovations PGTI and Alamo Group ALG all demonstrate multiple bullish catalysts. Strong momentum, analyst upgrades, and technical chart patterns greatly increase the chances that these are winning stocks.
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Salesforce
Salesforce is the leading provider of on-demand Customer Relationship Management (CRM) software, which enables organizations to better manage critical operations, such as sales force automation, customer service and support, marketing automation, document management, analytics, and custom application development.
Salesforce is currently the largest CRM vendor in the world with a market share of nearly 20%.
CRM has experienced significant analyst upgrades since its massive business overhaul this past year. The stock has a Zacks Rank #1 (Strong Buy), reflecting its strong earnings revisions trend. Current quarter earnings expectations have been revised higher by 12.4% and are expected to grow 60% YoY.
Sales are expected to grow 10.4% over the same period. The tremendous growth in the bottom line can be attributed to the profit prioritization the company has enacted over the last year, to the benefit of investors.
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Salesforce stock has been building bullish setups and breaking out all year, and it doesn’t look like that is going to stop. If the stock price can trade above the $213 level, it should signal a breakout that sends the stock to new YTD highs. However, if the price trades below the $205 level, investors should be cautious as the setup will be invalidated.
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PGT Innovations
PGT Innovations pioneered the U.S. impact-resistant window and door industry and today is the nation's leading manufacturer and supplier of residential impact-resistant windows and doors. PGTI is also one of the largest window and door manufacturers in the United States.
PGTI’s earnings estimates have been revised sharply higher over the last two months, reflected by its Zacks Rank #1 (Strong Buy). Next quarter earnings have been revised higher by 15% over the last two months, and FY23 earnings have been upgraded by 14.2% over that time.
Furthermore, PGT Innovations is trading well below its average valuation, and near its 10-year low. It is trading at a one-year forward earnings multiple of 13.9x, which is below the market average 20.6x, and well below its 10-year median of 19.3x.
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PGTI is in the process of breaking out from a bull flag this Monday morning and is exploring all-time highs. Now that the stock has cleared the $28 level, the buy signal has triggered. So long as the price is above this level by the market close on Monday the trade is valid.
Alternatively, if PGTI trades below the $27 level, the trade will be invalidated. Investors who buy the stock here can place stop-losses at this level.
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Alamo Group
Alamo Group is a leader in the design, manufacture, distribution, and service of high-quality equipment for infrastructure maintenance, agriculture and other applications. Their products include truck and tractor mounted mowing and other vegetation maintenance equipment, street sweepers, snow removal equipment, excavators, vacuum trucks, other industrial equipment, agricultural implements and related after-market parts and services.
Earnings estimates have experienced considerable revisions higher, earning it a Zacks Rank #1 (Strong Buy). FY23 earnings have been revised higher by 12.7% and are projected to grow 28% YoY. In the chart below investors can see the strong inflection higher expectations made in May.
Image Source: Zacks Investment Research
Along with the earnings estimate revisions, Alamo Group has a convincing technical setup. ALG is building out a nice consolidation right below its all-time high stock price. If the stock can trade above $186.60 it should send the stock to further new highs. But, if the price reverses and trades below the bottom of the range at $169.40 it should be avoided as the setup will be invalid.
Image Source: TradingView
Bottom Line
Each of these stocks has a lot going for them, but when trading momentum stocks it is critical to set a trading plan and stick with it. Even the best setups fail, and managing risk is critical, so picking a stop loss and knowing exactly how much you may lose on the trade is the most important decision in trading.
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Salesforce Inc. (CRM) : Free Stock Analysis Report
Alamo Group, Inc. (ALG) : Free Stock Analysis Report
PGT, Inc. (PGTI) : Free Stock Analysis Report
