These 5 Stocks Have Same Pattern As Amazon When It Launched 240% Run In 2016

As the stock market continues to move higher, here are five top stocks to watch that have newly minted handle buy points: Workday (WDAY), Zscaler (ZS), Union Pacific (UNP), Five Below (FIVE) and Dollar General (DG). Workday stock and Union Pacific stock broke out Friday in light volume, while Zscaler stock staged a breakout but closed just below its buy point. Five Below stock is just below an entry while Dollar General stock is forming its handle after a recent lackluster breakout. Chart patterns with handles are some of the most bullish bases of all time. Take Amazon (AMZN) for example: Amazon stock broke out of a cup-with-handle base in 2016 and surged 240% in the next 27 months.


Top Stocks To Watch With Handles

When looking for top stocks to watch, you want to focus on those that have strong fundamentals and technicals. One way to do that is by looking at the IBD Composite Rating. Five Below stock earns a highest-possible Composite Rating from IBD, a 99. Meanwhile Workday stock and Union Pacific stock both earn a 97 while Zscaler has an 87 and Dollar General stock an 86. In addition to having a strong Composite Rating, you want stocks on your watch list to be nearing buy points or in buy zones.

Amazon Stock Surged After Handle Breakout

When a stock forms a handle, it represents a final shakeout of weak holders before the stock clears resistance and blasts higher. Also, handle buy points can be at a lower price than another resistance level, like a prior high, providing earlier entries for investors.

Amazon stock surged after breaking out from a cup-with-handle base back in 2016. That led to Amazon stock more than doubling in the next two years. Amazon stock has since pulled back from its all-time highs in early September. Shares are currently hitting resistance at the 200-day line, with no visible buy point as of now.

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Workday Stock

Workday stock on Friday broke out past a 169.61 buy point from a cup-with-handle base, but volume was lighter than average. The cloud-based enterprise software firm is now trading 1.5% above that level. Workday stock is also closing in on its all-time high of 172.67 on Dec. 4.

You want to see really heavy volume, at least 40%-50% above normal, on a breakout as a sign of institutional support. Low-volume breakouts can work, but the odds are lower.

The relative strength line is near recent all-time highs but not yet hitting a new high. It’s especially bullish to see the RS line, which measures price performance vs. the S&P 500, hitting a new high as a stock breaks out. The RS line is a key metric to look at when analyzing top stocks to watch.

Zscaler Stock

Elsewhere in the software sector, Zscaler stock tried to break out above a handle buy point of 45.97 in intraday trade Friday but finished the day just 62 cents below that level. Volume was heavy. The new buy point comes after the cybersecurity stock quickly triggered a sell signal after an attempted breakout over 43.50 in mid-December.

The RS line is just below recent all-time highs, and at a notably higher level than when Zscaler stock was trading at record highs in late August. Zscaler stock is a March 2018 IPO that is still in the process of trying to become profitable. Analysts expect a loss of 2 cents a share in fiscal 2019, and EPS of 6 cents a share in fiscal 2020.

Zscaler is this week’s New America profile and Friday’s IBD Stock of the Day.

Union Pacific Stock

Like Workday stock, Union Pacific stock broke out above a new handle on Friday in light volume. Shares of the railroad stock are now 1.9% above the 155.39 entry. The handle is actually below a double-bottom entry point at 159.73, but it’s still valid, because the midpoint of the handle is above the midpoint of the consolidation. The relative strength line for Union Pacific stock is just below recent all-time highs.

Union Pacific earnings are due on Jan. 24. Analysts expect Union Pacific earnings to rise 33% to $2.04 as sales grow 5% to $5.73 billion. Shares jumped 8.7% in heavy volume on Jan. 8 after announcing Jim Vena, seen as a turnaround expert, as COO.

Rail stocks performed well Friday on China trade hopes, and many transport groups are currently among top-performing industry groups.

Five Below Stock

Five Below stock is a fraction below a handle buy point of 122.89. After hitting an all-time high of 136.13 after earnings in September, Five Below stock sold off as much as 36% over the following three months. But the discount retailer has quickly rebounded over the last several weeks, and is now just 10% below that record high.

Dollar General Stock

Also a discount retailer, Dollar General stock has a new handle at 177.34 and is trading 3.3% below the entry. This new handle could potentially be a better resistance level for Dollar General stock to clear.

Dollar General stock recently staged a breakout above a messy double-bottom base with a 113.25 buy point. And while that buy point is still technically valid, volume has been weak since Dollar General stock broke out, with shares soon undercutting that initial entry.


The Big Picture: Stocks Stay In The Fast Lane

Stocks At New Highs: These Top 5 Still Lead The Stock Market

Top Stocks To Watch And Buy: IPOs, Big And Small Caps, Growth Stocks

How To Trade Stocks: Spot Traits Of Proper Handles In Good Bases

The post These 5 Stocks Have Same Pattern As Amazon When It Launched 240% Run In 2016 appeared first on Investor's Business Daily.

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