Momentum Monday: 3 Top Ranked Stocks on the Verge of a Breakout
Want to take advantage of the incredible and persistent strength of the stock market this year? Focus on trading momentum stocks.
While many traders have been caught on their heels by the relentless upward momentum of the market, breakout traders have been living their best lives.
Momentum, or breakout trading is one of the best ways to take advantage of a market that continues to stubbornly grind higher like we are seeing this year. While the S&P 500 is up nearly 18% YTD, and the Nasdaq 100 is up 41% many individual stocks are up multiples of that.
Investors who want to partake in this advantageous market environment should focus on stocks with strong momentum, and a top Zacks Rank, paired with an asymmetric technical setup.
I have identified three such stocks that traders may want to consider for their portfolio. Marriott International MAR, Astec Industries ASTE, and Lam Research LRCX. Each of these stocks demonstrate market beating relative strength, top Zacks Ranks, and a compelling technical trade setup.
Image Source: Zacks Investment Research
Marriott International
The hospitality giant, Marriot International, is on the move. Its stock has charged higher ceaselessly since the beginning of the year, now up 39% YTD.
After breaking out from sideways action in July, MAR stock is now forming a bull flag continuation pattern just below its all-time high. If the price can break out above the $205.75 level, which it looks like it may do today, it should make another bull run higher.
Alternatively, if the stock reverses back below that level, or is unable to hold the $200 level, investors may want to wait for another opportunity, as the setup will be invalid.
Image Source: TradingView
Marriot International boasts a Zacks Rank #1 (Strong Buy), indicating upward trending earnings revisions. Analysts are in near unanimous agreement in upgrading Marriot International’s earnings estimates. Current quarter earnings estimates have been revised higher by 3.5% and are projected to grow 24.3% YoY to $2.10. Sales for the same period are expected to grow 10% YoY to $5.8 billion.
FY23 earnings estimates have been boosted by 2.6% and are forecast to climb 28.7% YoY to $8.61, while sales for the period are projected to climb 15% YoY to $23.9 billion.
MAR is trading at a one year forward earnings multiple of 23.5x, which is just above the industry average of 22x, and right in line with its 10-year median of 23.7x.
Image Source: Zacks Investment Research
Astec Industries
Astec Industries is a leading manufacturer and marketer of road building equipment. The company sells equipment used in each phase of road building, from quarrying and crushing the aggregate to applying the asphalt.
Astec Industries also manufactures equipment and components unrelated to road construction, including equipment for the mining, quarrying, construction and demolition industries and port and rail yard operators among many other industries.
Astec holds a dominant position in attractive niche markets in industries benefiting from long-term secular trends including population growth, urbanization, and aging infrastructure. It also boasts an industry-leading reputation for innovation, high-quality products, and superior customer service.
ASTE has seen analysts revise earnings estimates nicely higher over the last couple of months giving it a Zacks Rank #1 (Strong Buy) rating. Current quarter earnings estimates have been upgraded by 4.4% and are projected to climb 71.4% YoY to $0.48 per share. FY23 earnings estimates have been revised higher by 4.1% over the last two months and are expected to grow 128% YoY to $2.81 per share.
Image Source: Zacks Investment Research
Astec Industries has clearly begun to draw investors’ attention demonstrated by the stage one breakout. ASTE carved out a nearly 18-month base from which it broke out of and moved emphatically higher just last month. Now the stock looks to be forming a bull flag continuation pattern, where investors can trade the next move higher.
If ASTE stock can trade above the $53.50 level, it should initiate a breakout, and propel the stock significantly higher. However, if the stock can’t hold the $51.40 level, the setup is invalidated, and investors can look for other opportunities.
Image Source: TradingView
Lam Research
Lam Research is a leading global supplier of wafer fabrication equipment and services for the semiconductor industry. The company's advanced solutions play a crucial role in the production of integrated circuits used in various electronic devices. With a focus on innovation and technological excellence, Lam Research has established itself as a key player in enabling the advancement of semiconductor manufacturing processes.
Like the other two stocks, LRCX currently has a Zacks Rank #1 (Strong Buy), reflecting upward trending earnings revisions. Current quarter earnings estimates have been upgraded by 8.2% over the last two months, and FY23 earnings estimates have been revised higher by nearly 8%.
Image Source: Zacks Investment Research
Lam Research along with the rest of the semiconductor industry has enjoyed very bullish price action throughout 2023. The stock continues to form bases and breakout. The current bull flag is now forming just below the stock’s all-time highs, which if it overtakes should cause a rush of new buy orders.
If Lam Research stock can trade above the $708 level, it should move swiftly higher and make an assault on the all-time high of $730. But, if the price can’t hold above the $676 level, sellers will have taken control, and the trade setup will no longer be valid.
Image Source: TradingView
Bottom Line
Each of these trades 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, so traders must pick hard stops and respect them. Risk management is the key to successful trading.
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Marriott International, Inc. (MAR) : Free Stock Analysis Report
Astec Industries, Inc. (ASTE) : Free Stock Analysis Report
Lam Research Corporation (LRCX) : Free Stock Analysis Report
