If You're Looking For Top Stocks During Stock Market Correction, Read This

During a stock market correction it’s hard to find top stocks that are holding up. Still, it’s important to find the few that are and add them to your watch list. That way you can be prepared to get back in, once the market is in a confirmed uptrend. Broadcom (AVGO), CME Group (CME), Procter & Gamble (PG), O’Reilly Automotive (ORLY) and Atlassian (TEAM) are five stocks that are holding strong despite the sell-off. Atlassian stock leads the group with a highest-possible IBD Composite Rating of 99, while O’Reilly stock earns a 98. CME stock has a 94 while P&G stock has a 91 and Broadcom stock has an 84.

Broadcom Stock

Apple (AAPL) chip supplier Broadcom is in a messy consolidation going back just over a year. Broadcom stock recently formed a proper handle with a 261.69 buy point. Shares are trading 6.4% below that level.

Meanwhile, the relative strength line for Broadcom stock is at a one-year high, above where it was when Broadcom formed the top of its handle. That’s a bullish signal for Broadcom stock since the RS line measures price performance vs. the S&P 500. Broadcom stock is trading about 14% below its all-time high.

Apple is Broadcom’s largest partner in North America, according to Bloomberg. And though Apple iPhone sales are slowing, Broadcom also serves the automotive and data center markets, among other growing areas.

In March, Broadcom gave up a hostile bid for Qualcomm after the Trump administration blocked the deal on national security grounds. Broadcom stock plunged to 2018 lows in July after the chipmaker agreed to buy software maker CA Technologies.

But shares have rallied following the last two Broadcom earnings reports, with the latest results released on Dec. 6.

CME Stock

CME stock is pulling back to its 50-day line and struggling to find support at that level. This past week was the first time since its double-bottom breakout in early September that CME stock has fallen below and tested support at the 50-day. CME stock is now up about 6% from its last breakout.

In a stock market uptrend, a pullback to — and successful rebound from — the 50-day line is considered a buying opportunity. But CME stock is now below that level.

However, seeing the RS line is at its highest level in more than 10 years, even though CME stock has backed off its all-time high of 197.08 reached on Nov. 19, is positive. The RS line can be a confirming indicator when looking at top stocks to buy and watch.

P&G Stock

Elsewhere, P&G stock is finding support at its 50-day line. Procter & Gamble shares dipped below a 90.80 buy point from a cup-with-handle base on Thursday, but Friday’s rebound puts P&G stock barely back above the entry.

The consumer products giant first broke out of its cup-with-handle base in early November, and this is the first time it tested the buy zone. But even though P&G stock is in a buy area, investors should avoid making new buys during a stock market correction.

Like Broadcom stock and CME stock, P&G stock’s RS line is at a high even though the Dow Jones component is trading below its recent highs.

O’Reilly Stock

O’Reilly stock is trading 9% below a 363.30 buy point in a base-on-base formation. But as the stock market correction worsens, look to see if O’Reilly stock can hold the lows of its base. The auto parts retailer will also need to retake its 50-day line before it crosses the potential buy point, and that could be an area of resistance.

Even with O’Reilly stock below its 50-day, the RS line is at an all-time high, passing its prior high from several years ago.

Atlassian Stock

Atlassian stock staged an upside reversal Thursday, finding key support at its 50-day line as many top software stocks suffered huge weekly losses. The enterprise software firm, an IBD 50 stock, is now trading 9.8% below a cup-with-handle buy point of 89.92.

Also, Atlassian stock has an RS line hitting an all-time high. That’s even though the stock is trading some 17% below its all-time high of 98.21 from early October. In addition to strong share-price performance, Atlassian stock also boasts top-notch earnings and sales growth.

Top Stocks In Stock Market Correction

While many on Wall Street have a “buy the dip” mentality, we don’t know when this stock market correction — a bear market for the Nasdaq — will end. Instead of a hold-and-hope strategy, cut your losses quickly and wait for the stock market to enter a new uptrend before buying. That’ll increase your odds of success when making new buys — especially if you have a watch list of top stocks at the ready.


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