After witnessing an astonishing rally for more than five months in a row, Wall Street suffered a major blow on Sep 3. Markets rebounded on Sep 9, after facing a terrible pull down in the last three trading days. These were the worst-performing days in a row since April. However, all the three major stock indexes — the Dow, the S&P 500 and the Nasdaq Composite — plunged again on Sep 10 after a choppy trading session.
This clearly shows that volatility has set in Wall Street at least for the short-term. Historically, September is known as the worst-performing month in Wall Street. Investors started panicking that the coronavirus-defying rally would terminate this month.
The volatility may persist for a few more days as a section of economists and financial experts have already warned that larger corrections are in the offing. However, a closer look at the past five days' trading pattern clearly reveals that it was profit booking and not any major economic, financial or political factor that led to the meltdown.
The technology sector pulled down the overall market after being the predominant driver of the impressive showing over the last five months. It was technology that had helped Wall Street in exiting a coronavirus-induced short bear market and form a new bull market. However, in the due course of market's V-shaped recovery from its recent trough on Mar 23, technology stocks got overvalued.
At this stage, wouldn’t it be a safer strategy to look for stocks that are winners and have the potential to gain further?
Sounds Good? Here’s How to Execute It:
One should primarily target stocks that have freshly been on a bull run. Actually, 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 else it would have probably crashed. So, looking at stocks that are capable of beating the benchmark that they have set for themselves seems rational.
However, recent price strength alone cannot create magic. Therefore, you need to set other relevant parameters to create a successful investment strategy.
Here’s how you should create the screen to shortlist the current as well as the potential winners.
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 have narrowed down the search from over 7,700 stocks to just 24.
Here we present five out of those 24 stocks:
Hibbett Sports Inc. (HIBB - Free Report) is engaged in the retail of athletic-inspired fashion products through its stores. Its stores offer a range of merchandise, including athletic footwear, athletic and fashion apparel, sports equipment, and related accessories. It operates in two segments, Lawson and Bolt.
The stock price has jumped 45.3% in the past four weeks. The company has expected earnings growth of 86.3% for the current year (ending January 2021). The Zacks Consensus Estimate for the current year has improved more than 48.1% over the last 30 days.
BMC Stock Holdings Inc. (BMCH - Free Report) distributes lumber and building materials to new construction, and repair and remodeling contractors in the United States.
The stock price has climbed 20.6% in the past four weeks. The company has expected earnings growth of 8.4% for the current year. The Zacks Consensus Estimate for the current year has improved 56.1% over the last 60 days.
Mr. Cooper Group Inc. (COOP - Free Report) provides quality servicing, origination and transaction-based services principally to single-family residences in the United States. Its brand consists of Mr. Cooper and Xome.
The stock price has surged 11.5% in the past four weeks. The company has expected earnings growth of more than 100% for the current year. The Zacks Consensus Estimate for the current year has improved 85.3% over the last 60 days.
Barrick Gold Corp. (GOLD - Free Report) is engaged in the exploration, mine development, production, and sale of gold and copper properties. It has ownership interests in gold mines located in North America, South America and Africa.
The stock price has advanced 10.9% in the past four weeks. The company has expected earnings growth of 80.4% for the current year. The Zacks Consensus Estimate for the current year has improved 2.2% over the last 30 days.
Nautilus Inc. (NLS - Free Report) is a fitness solutions company, which designs, develops, sources, and markets cardio and strength fitness products, and related accessories for consumer and commercial use in the United States, Canada and internationally. It operates in two segments, Direct and Retail.
The stock price has gained 10.1% in the past four weeks. The company has expected earnings growth of more than 100% for the current year. The Zacks Consensus Estimate for the current year has improved more than 100% over the last 60 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.
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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.