From the desk of Steve Strazza @Sstrazza
Welcome to the 2 to 100 Club.
As many of you know, something we’ve been working on internally is using various bottom-up tools and scans to complement our top-down approach. It’s really been working for us!
One way we’re doing this is by identifying the strongest growth stocks as they climb the market-cap ladder from small- to mid- to large- and, ultimately, to mega-cap status (over $200B).
Once they graduate from small-cap to mid-cap status (over $2B), they come on our radar. Likewise, when they surpass the roughly $30B mark, they roll off our list.
But the scan doesn’t just end there.
We only want to look at the strongest growth industries in the market, as that is typically where these potential 50-baggers come from.
Some of the best performers in recent decades – stocks like Priceline, Amazon, Netflix, Salesforce, and myriad others – would have been on this list at some point during their journey to becoming the market behemoths they are today.
When you look at the stocks in our table, you’ll notice we’re only focused on Technology and Growth industry groups such as Software, Semiconductors, Online Retail, Solar, etc.
Then, like any good technician, we filter the list down to those closest to new highs.
This allows the cream of these strong groups to rise to the top and helps streamline our mission to identify technical breakouts in the top-performing stocks.
With the severe drawdowns endured by so many growth stocks since last year, all-time highs just aren’t a reality for most of the names on this list right now.
Using 52-week highs will open the door for more stocks and give us more options for finding the best setups.
Here is this week’s list:
*Click to enlarge view
Notice all the Chinese tech stocks at the top of the list. China has been showing incredible leadership of late. We’re writing a separate post about these stocks which will be on the blog later.
Let’s dive in and discuss some of our favorite long setups.
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Our first setup today is a $14.9B company that provides services and solutions in the defense, intelligence, civil, and health markets. Here is Leidos $LDOS:
Leidos has been grinding sideways in a prolonged continuation pattern for nearly three years now. Price is currently coiling at the upper bounds of its range, just below our objective of 112.50.
Since we don’t believe in triple tops, we’re looking for the stock to resolve higher any day now.
When it happens, we expect LDOS to complete a relative trend reversal and take on a leadership role versus the broader market.
We want to be long LDOS, but only on strength above 112.50, with a target of 164.50 over the next 3-6 months.
Our second setup today is a $9.5B company that provides electronic manufacturing services and solutions. Here is Jabil $JBL:
Jabil is reclaiming its highs from over 20 years ago as it looks poised to resolve higher from a massive base. This level has acted as resistance in the past, making it a great place to define our risk.
Bulls want to see the stock take out this overhead supply zone with a decisive upside resolution, and we want to own the stock when it does.
On a relative basis, JBL has already broken to the upside from a multi-year base and downtrend line. If the stock makes a valid upside resolution on absolute terms, we expect it to continue outperforming the broader market.
If we’re above 69, we want to own JBL with a target of about 109 over the coming 3-6 months.
Our third and final setup today is a $4.3B company that designs, develops, and manufactures aerospace and defense products and systems. Here is Aerojet Rocketdyne $AJRD:
After basing for the past three years, Aerojet Rocketdyne is pressing toward all-time highs as it challenges the upper bounds of its range.
On a relative basis, AJRD has been outperforming all year and is in the process of resolving to the upside from a multi-year base. If the stock makes a valid breakout on absolute terms, we expect this leadership to accelerate.
If we’re above 53, we want to own AJRD with a target of 65.50 over the coming 1-3 months.
That’s the latest scoop on our 2 to 100 Club.
We hope you enjoyed it! Thanks for reading, and please reach out to us with any questions.
Good fishing.