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Unstoppable Momentum: 3 Stocks Poised for Yet Another Rally
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After rallying aggressively over the last five weeks the stock market took a much needed break this week, with the broad indexes nearly unchanged. In a strong bull market like the one we seem to be in currently, a week of sideways action is as good as a correction in terms of resetting stocks for another move higher.
While some investors may find it hard to start buying into stocks that are already up so much YTD, the momentum anomaly can often push those stocks further than anyone expects. To make momentum trading even more risk averse, investors can utilize technical chart patterns, which define clear entries and exits and more rigorously outline positive asymmetric trade setups.
Below, I have identified three top-ranked stocks with strong momentum, and compelling technical chart setups. Chipotle Mexican Grill (CMG - Free Report) , Shopify (SHOP - Free Report) , and Meta Platforms (META - Free Report) are worthy considerations for any momentum traders. Furthermore, each of these stocks have long-term, market beating performances, proving their value creating ability, and improving the odds of them being winning stocks in the near-term.
Image Source: Zacks Investment Research
Chipotle Mexican Grill
Chipotle Mexican Grill, who revolutionized the restaurant industry with its introduction of the fast-casual franchise, has been on an absolute tear, up 48% YTD. CMG has also experienced some steady revisions higher in its earnings expectations over the last two months.
Current quarter earnings expectations have been revised higher by 6.5% and are projected to grow 30% YoY. FY23 earnings estimates have been upgraded by 6% and are forecasted to climb 34% YoY. Over the last year Chipotle Mexican Grill has made headway on increasing margins by streamlining operations, significantly boosting profits.
Image Source: Zacks Investment Research
After clearing its previous all-time highs in April this year, CMG has been building out a tight base above that level. This consolidation provides investors with a fantastic setup from which to trade off.
If Chipotle stock can break out above the $2,100 level, it should trade significantly higher, and print yet another new all-time high. However, if the price can’t hold above the $2,010 level the setup is invalid, and investors may want to wait for another trade signal to get long CMG.
Image Source: TradingView
Shopify
Shopify, the multi-channel e-commerce platform for small and medium-sized businesses has made a strong recovery this year after getting completely demolished in the bear market of 2022.
SHOP stock corrected a brutal -86% in 2022 after reaching a dizzying valuation during the euphoria of 2021. But, now at a more reasonable valuation SHOP has drawn investors in again and rallied 83% YTD. It should be noted that even after the strong performance this year the stock is still well off its 2021 all-time high.
Image Source: Zacks Investment Research
Shopify has benefited from a strong earnings revision trend over the last few months, earning it a Zacks Rank #2 (Buy) rating. In a very promising development, earnings estimates have flipped positive across timeframes for the e-commerce platform.
Current quarter earnings have been revised from -$0.01 to $0.06 per share while FY23 earnings estimates have been upgraded by 540% to $0.32 per share. Sales are projected to be very strong as well, with current quarter sales expected to climb 25% YoY and FY23 sales expected to increase 20.4% YoY.
Image Source: Zacks Investment Research
Shopify too has a very interesting technical chart setup building, although it is slightly different than the other two. While CMG and META are building high-base breakouts, typical of late-stage rallies, SHOP is building a stage-one breakout. This indicates that Shopify stock could have significantly more room to rally.
If SHOP stock can trade above the $65 level, which it has had trouble closing above on a weekly basis, it should see another big rally, prolonging its strong performance. Alternatively, if the price can’t stay above the $58 level, investors should be weary as the setup will no longer be valid.
Image Source: TradingView
Meta Platforms
Meta Platforms stock has rallied an incredible 136% YTD, trailing just Nvidia as the strongest stock on the S&P 500. META continues to experience upgrades in its earnings estimates and has sat on the Zacks #1 Rank list for 3 months now.
Current quarter earnings expectations have been revised higher by 15.6% over the last two months and are forecasted to grow 14.6% YoY. FY23 earnings estimates have been boosted by nearly 14% and are projected to climb 21.5% YoY.
Image Source: Zacks Investment Research
META stock has been building out bull flags and breaking out convincingly all year. The stock has now built out another extremely tight consolidation this week from which we can measure a trade.
If the price can break out above the $285.25 level, it should begin a move toward the $300 level. But, if the stock loses this week’s support of $277.25, investors should be cautious as the setup will no longer be valid, and META may want to explore lower prices after such an incredible run.
Image Source: TradingView
Conclusion
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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Unstoppable Momentum: 3 Stocks Poised for Yet Another Rally
After rallying aggressively over the last five weeks the stock market took a much needed break this week, with the broad indexes nearly unchanged. In a strong bull market like the one we seem to be in currently, a week of sideways action is as good as a correction in terms of resetting stocks for another move higher.
While some investors may find it hard to start buying into stocks that are already up so much YTD, the momentum anomaly can often push those stocks further than anyone expects. To make momentum trading even more risk averse, investors can utilize technical chart patterns, which define clear entries and exits and more rigorously outline positive asymmetric trade setups.
Below, I have identified three top-ranked stocks with strong momentum, and compelling technical chart setups. Chipotle Mexican Grill (CMG - Free Report) , Shopify (SHOP - Free Report) , and Meta Platforms (META - Free Report) are worthy considerations for any momentum traders. Furthermore, each of these stocks have long-term, market beating performances, proving their value creating ability, and improving the odds of them being winning stocks in the near-term.
Image Source: Zacks Investment Research
Chipotle Mexican Grill
Chipotle Mexican Grill, who revolutionized the restaurant industry with its introduction of the fast-casual franchise, has been on an absolute tear, up 48% YTD. CMG has also experienced some steady revisions higher in its earnings expectations over the last two months.
Current quarter earnings expectations have been revised higher by 6.5% and are projected to grow 30% YoY. FY23 earnings estimates have been upgraded by 6% and are forecasted to climb 34% YoY. Over the last year Chipotle Mexican Grill has made headway on increasing margins by streamlining operations, significantly boosting profits.
Image Source: Zacks Investment Research
After clearing its previous all-time highs in April this year, CMG has been building out a tight base above that level. This consolidation provides investors with a fantastic setup from which to trade off.
If Chipotle stock can break out above the $2,100 level, it should trade significantly higher, and print yet another new all-time high. However, if the price can’t hold above the $2,010 level the setup is invalid, and investors may want to wait for another trade signal to get long CMG.
Image Source: TradingView
Shopify
Shopify, the multi-channel e-commerce platform for small and medium-sized businesses has made a strong recovery this year after getting completely demolished in the bear market of 2022.
SHOP stock corrected a brutal -86% in 2022 after reaching a dizzying valuation during the euphoria of 2021. But, now at a more reasonable valuation SHOP has drawn investors in again and rallied 83% YTD. It should be noted that even after the strong performance this year the stock is still well off its 2021 all-time high.
Image Source: Zacks Investment Research
Shopify has benefited from a strong earnings revision trend over the last few months, earning it a Zacks Rank #2 (Buy) rating. In a very promising development, earnings estimates have flipped positive across timeframes for the e-commerce platform.
Current quarter earnings have been revised from -$0.01 to $0.06 per share while FY23 earnings estimates have been upgraded by 540% to $0.32 per share. Sales are projected to be very strong as well, with current quarter sales expected to climb 25% YoY and FY23 sales expected to increase 20.4% YoY.
Image Source: Zacks Investment Research
Shopify too has a very interesting technical chart setup building, although it is slightly different than the other two. While CMG and META are building high-base breakouts, typical of late-stage rallies, SHOP is building a stage-one breakout. This indicates that Shopify stock could have significantly more room to rally.
If SHOP stock can trade above the $65 level, which it has had trouble closing above on a weekly basis, it should see another big rally, prolonging its strong performance. Alternatively, if the price can’t stay above the $58 level, investors should be weary as the setup will no longer be valid.
Image Source: TradingView
Meta Platforms
Meta Platforms stock has rallied an incredible 136% YTD, trailing just Nvidia as the strongest stock on the S&P 500. META continues to experience upgrades in its earnings estimates and has sat on the Zacks #1 Rank list for 3 months now.
Current quarter earnings expectations have been revised higher by 15.6% over the last two months and are forecasted to grow 14.6% YoY. FY23 earnings estimates have been boosted by nearly 14% and are projected to climb 21.5% YoY.
Image Source: Zacks Investment Research
META stock has been building out bull flags and breaking out convincingly all year. The stock has now built out another extremely tight consolidation this week from which we can measure a trade.
If the price can break out above the $285.25 level, it should begin a move toward the $300 level. But, if the stock loses this week’s support of $277.25, investors should be cautious as the setup will no longer be valid, and META may want to explore lower prices after such an incredible run.
Image Source: TradingView
Conclusion
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.