2 To 100 Club (05-26-2021)

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 helps streamline our mission to identify technical breakouts in the top-performing stocks.

We’ve sorted this week’s list by proximity to all-time highs as the major indexes continue to trade just beneath record levels themselves. Although, notice how there are far fewer stocks making new highs than usual once again this week? That is because growth and tech - which is primarily what the 2-to-100 Club is, have taken a much bigger hit than other areas of the market in recent weeks and months.

While we're used to having a list of names all within about 1% of highs, the stocks in this week's table are as much as 6% off all-time highs. 

We've had a lot of overlap at the top of our list in recent reports as the same stocks continue to show strength and grind higher, or consolidate at their former highs...

Here are some from this week's list that we recently outlined long setups in and remain bullish on: EPAM BRKR SNX ARW SSNC DAVA.

You can read more about these and see our risk levels on our trade ideas page.

When markets experience volatility or selling pressure like growth stocks are currently, it's a great time to dive under the hood and identify leadership as the absolute strongest stocks in the space will be bucking the trend and resuming higher during these periods. Those names that are showing the most resilience now, are likely to be your future outperformers once the dust settles and corrective action alleviates.

So let’s dive in and identify some of these strong stocks and outline bullish setups in them.