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5 Stocks With Recent Price Strength Amid January Rally

Wall Street wrapped up 2022 as the worst year since 2008, terminating a three-year winning streak. However, U.S. stock markets have revived in January 2023. Month to date, the three major indexes — the Dow, the S&P 500 and the Nasdaq Composite — have rallied 2.5%, 6% and 11%, respectively.

Peak inflation seems behind us. Less-than-expected inflation rates in October, November and December with respect to several measures have clearly indicated this. The University of Michigan Surveys of Consumers released on Jan 27 showed that the one-year inflation outlook slipped to a final reading of 3.9% this month from 4.4% in December, the lowest reading since April 2021.

The Fed raised  the benchmark interest rate by 4.25% in 2022 to the range of 4.25- 4.5%. The market is currently expecting the central  bank to increase the interest rate by maximum 75 basis points in 2023. Some financial analysts are expecting the first rate cut to come in the last quarter of 2023 or in early 2024.

Headwinds of the pandemic are also behind us. China has been gradually reopening since the beginning of this year after strict lockdowns last year. This will help revive the completely devastated global-supply chain system. Global trade will also gain momentum.

The U.S. labor market remains resilient. The initial results of fourth-quarter 2022 earnings were not as disappointing as expected. Therefore, the Fed may reach its goal of a soft landing of the economy.

Several of stocks have shown price strength buoyed by market rally. These stocks are likely to gain in the near term and are backed by a favorable Zacks Rank. Five of them are — MercadoLibre Inc. MELI, Axcelis Technologies Inc. ACLS, Shinhan Financial Group Co. Ltd. SHG, Pinduoduo Inc. PDD and Collegium Pharmaceutical Inc. COLL.

Here’s How We Arrived at the Picks

We have primarily targeted stocks that have freshly been on a bull run. Stocks seeing price strength recently have a high chance of carrying the momentum forward.

If a stock is continuously witnessing an uptrend, there must be a solid reason or it would have probably crashed. So, looking at stocks capable of beating the benchmark that they have set for themselves seems rational.

However, recent price strength alone cannot create magic. Therefore, other relevant parameters are needed to create a successful investment strategy.

Here’s how you should create the screen to shortlist the current as well as the potential winners.

Screening Parameters:

Percentage Change in Price (4 Weeks) greater than zero: This criterion shows that the stock has moved higher in the last four weeks.

Percentage Change Price (12 Weeks) greater than 10: This indicates that the stock has seen momentum over the last three months. This lowers the risk of choosing stocks that may have drawn attention due to the overwhelming performance of the overall market in a very short period.

Zacks Rank 1: No matter whether market conditions are good or bad, stocks with a Zacks Rank #1 (Strong Buy) have a proven history of outperformance. You can see the complete list of today’s Zacks #1 Rank stocks here.

Average Broker Rating 1 or 2: This indicates that brokers are also highly hopeful about the stock’s future performance.

Current Price greater than 5: The stocks must all be trading at a minimum of $5.

Current Price/ 52-Week High-Low Range more than 85%: This criterion filters stocks that are trading near their respective 52-week highs. It indicates that these are strong enough in terms of price.

Just these few criteria narrowed down the search from over 7,700 stocks to 39.

Let’s discuss five out of these 39 stocks:

MercadoLibre is benefiting from strength in the commerce and fintech businesses. Robust product offerings and credit portfolio expansion are respectively driving MELI’s commerce and fintech revenues. Further, robust mobile-point-of-sale business and growing adoption of MercadoPago are driving the total payment volume growth of MELI. Also, the rapid adoption of Mobile Wallet remains positive.

The stock price of MELI has jumped 44.3% in the past four weeks. MercadoLibre has an expected earnings growth rate of 46.5% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 2.8% over the last seven days.

Axcelis Technologies is a leading producer of ion implantation equipment used in the fabrication of semiconductors. ACLS also produces dry strip, photostabilization and rapid thermal processing equipment, which is used in semiconductor manufacturing primarily before and after the ion implantation process. In addition, ACLS provides extensive aftermarket service and support, including spare parts, equipment upgrades, maintenance services and customer training.

The stock price of Axcelis Technologies has climbed 39.2% in the past four weeks. ACLS has an expected earnings growth rate of 0.6% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 6.9% over the last 30 days.

Shinhan Financial Group provides financial products and services in South Korea and internationally. SHG operates through six segments: Banking, Credit Card, Securities, Life Insurance, Credit, and Others. SHG offers retail banking services, including demand, savings, and fixed deposit-taking, checking accounts, mortgage and home equity, and retail lending, electronic banking and automatic teller machines, and bill paying, payroll and check-cashing, currency exchange, and wire fund transfer services.

The stock price of Shinhan Financial Group has surged 29.7% in the past four weeks. SHG has an expected earnings growth rate of 6.3% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 17.6% over the last 30 days.

Pinduoduo operates an e-commerce platform in the People's Republic of China. PDD operates Pinduoduo, a mobile platform that offers a range of products, including apparel, shoes, bags, mother and childcare products, food and beverages, fresh produce, electronic appliances, furniture and household goods, cosmetics and other personal care items, sports and fitness items, and auto accessories.

The stock price of Pinduoduo has advanced 28.4% in the past four weeks. PDD has an expected earnings growth rate of 13% for the current year. The Zacks Consensus Estimate for next-year earnings has improved 11.3% over the last 30 days.

Collegium Pharmaceutical is a specialty pharmaceutical company. COLL develops and commercializes prescription and over-the-counter pharmaceuticals for the treatment of central nervous system, respiratory and skin-related disorders. COLL’s product candidate consists of COL-195, COL-196, COL-171, COL-003 and COL-172 which are in different clinical trial. COLL developed a formulation platform technology, DETERx, for the treatment of chronic pain.

The stock price of Collegium Pharmaceutical has rallied 21.9% in the past four weeks. COLL has an expected earnings growth rate of 46.5% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 2.8% over the last seven days.

You can get the rest of the stocks on this list by signing up now for your 2-week free trial to the Research Wizard and start using this screen in your own trading. Further, you can also create your own strategies and test them first before taking the investment plunge.

The Research Wizard is a great place to begin. It's easy to use. Everything is in plain language. And it's very intuitive. Start your Research Wizard trial today. And the next time you read an economic report, open up the Research Wizard, plug your finds in, and see what gems come out.

Click here to sign up for a free trial to the Research Wizard today.

Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.

Disclosure: Performance information for Zacks’ portfolios and strategies are available at: https://www.zacks.com/performance.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Axcelis Technologies, Inc. (ACLS) : Free Stock Analysis Report

Shinhan Financial Group Co Ltd (SHG) : Free Stock Analysis Report

MercadoLibre, Inc. (MELI) : Free Stock Analysis Report

Collegium Pharmaceutical, Inc. (COLL) : Free Stock Analysis Report

Pinduoduo Inc. Sponsored ADR (PDD) : Free Stock Analysis Report

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