Before we get too excited, I’m not talking about stocks that are literally launching rockets into orbit. While that sounds like a neat idea, I’d rather find stocks whose prices are launching like rockets into orbit. These stocks are exhibiting the most explosive chart pattern we know of. The breakout.
Ahh, the breakout. No other chart pattern is more rewarding when you’re teaming up technical analysis with the Zacks Rank. If you dig down into the fundamentals between the two of them it makes sense. The Zacks Rank helps us uncover stocks that analysts are becoming increasingly bullish on. They’re pushing up their earnings estimates, which even without expanding valuations, should put upward pressure on the stock price.
When you couple this with stocks that are breaking to new highs you get an interesting combination. Shares are breaking out to levels they’ve never traded at before. This breakout makes everyone re-think the valuation and the fresh influx of buyers helps transform the stock as well as put it on the radar of traders all around the world.
Some of the technical analysis is a self-fulfilling prophecy. Traders often look for stocks hitting new 52-week highs. They like buying into the momentum associated with pushing through to uncharted territory. On the flip side, the shorts like watching for these stocks so they can pound them down when they run out of gas.
Here I’ve uncovered three stocks with recent earnings estimate revisions to the upside, are Zacks Rank #1 (Strong Buy) or Zacks Rank #2 (Buy) stocks which have Momentum Style Scores of “A” or “B.” This way, we have shares pushing in a positive direction, breaking out from previous highs, that have strength relative to their industry peers and are showing great earnings momentum.
Nordic American (NAT - Free Report)
Nordic American is engaged of acquiring, disposing, owning, leasing, and chartering three double hull Suezmax oil tankers. They have a unique business model which seeks high dividend payouts with low financial risk. They have a growth focus to go from 3 to 24 Suezmax crude oil tankers in less than eight years.
Shares have appreciated along with the Baltic Dry Index. After bottoming out in early may below $11.50 shares rallied after the commodity channel index reached an extremely oversold condition of -200. NAT leapfrogged the 21 moving average in mid-May and has been rallying ever since. Shares have retreated a bit since hitting a fresh 52-week high right at $15.
AVG Technologies (AVG)
The Company produces and develops software for, threat detection, threat prevention, and risk analysis. Its product portfolio includes Internet security, PC performance optimization, online backup, mobile security, identity protection, and family safety software. It also offers various security suites for core protection, including anti-virus, anti-spyware, anti-rootkit, social networking protection, and LinkScanner; chatting and downloading.
AVG shares have moved very aggressively this year after breaking out of a consolidation from November to mid-February. The mid-February move coincides with a bullish time for much of the internet security industry. Heavy volume and a fierce rally ultimately faded and shares retreated back to the top end of the consolidation range. From there, a new round of buying catapulted shares up through $22 while the 21 day moving average continues to serve as bottom end support with shares now a shade off a fresh 52-week high of $29.09.
Starbucks (SBUX - Free Report)
Starbucks Corporation purchases and roasts high-quality whole bean coffees and sells them along with fresh, rich-brewed, Italian style espresso beverages, a variety of pastries and confections, and coffee-related equipments primarily through its company-operated retail stores. In addition to sales through its company-operated retail stores, Starbucks sells whole bean coffees through a specialty sales group and supermarkets. Additionally, Starbucks produces and sells bottled Frappuccino coffee drink and a line of premium ice creams through its joint venture partnerships and offers a line of innovative premium teas produced by its wholly owned subsidiary, Tazo Tea Company.
The chart for SBUX has been a much steadier progression than that of AVG or NAT. Over the last several months, shares have increased from $35 to the $53.71 level it trades at currently. There have only been five short spikes which have taken the commodity channel index above 200. The retracements have been even more mild as only the early March moved pushed oversold levels. The 21 day moving average has only been breached to the downside briefly and continues to provide good buying opportunities.
These stocks rocketing off the Launchpad could provide investors with other-worldly returns. Take the rocket fuel of the Zacks Rank and Momentum Style Score and the trajectory of these breakout stocks, put them together and hang on tight.
David Bartosiak is a momentum strategist who combines the fundamental power of the Zacks Rank with the timeliness and precision of technical analysis to find the best trades. Be sure to FOLLOW THE AUTHOR above to stay on top of all the hottest trade ideas.