[Premium] 2 to 100 Club (01-13-2021)

From the desk of Steve Strazza @Sstrazza

Welcome to the 2 to 100 Club.

Something we’ve been working on internally this year is using various bottoms-up tools and scans to complement our top-down approach. One way we’re doing this is by identifying 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, and Salesforce, to a myriad of others… all 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 will notice we are 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 that are closest to new 52-week highs. This allows the cream of these strongest groups to rise to the top and makes our job easier to identify technical breakouts in the top-performing stocks.

We've sorted this week's list by proximity to all-time highs again as the major indexes continue to trade around record highs themselves.

The list is extra short this week as all of these names are within 2% of all-time highs - or basically at all-time highs.

Before we discuss this week's most favorable setups, lets' review some old winners and open positions.

Here is the $25B traditional semiconductor company, Maxim Integrated Products $MXIM.

Maxim makes chips for the industrial, computing, and consumer products industries.

We are actually already long Maxim and have been since it broke out of its multi-year base above 75 a little over 2 months ago.

We outlined a trade idea in the stock in the November 5th edition of the 2-to-100 club.

This week Maxim hit our target at 95, giving us a 25% return in two months' time.

Nine out of ten times we'd be taking all or most of our money off the table in this situation... but, not with Maxim.

Here's why.

In breaking out of its more recent, multi-year base, price overshot things a bit and just reclaimed its all-time highs from 2000.

You know how we feel about these multi-decade base breakouts in semiconductor stocks. We keep finding them, we keep buying them, and they keep making us money.

We see no reason why Maxim should be any different

Now that the stock is back at record highs, we no longer want to use the Fibonacci extensions of the smaller base. Instead, we want to zoom out like we did in the chart above and use the extensions from the early 2000s drawdown as our risk levels.

This gives us a bit more cushion to protect us from any downside volatility as well as a slightly higher price target.

We want to continue to own (or buy) Maxim as long as we're above (or against) 88 with a 3-6 month target of 135.