Why iRobot Leads 4 Top Stocks Near Buys With Earnings On The Horizon

Your top stocks to watch this week are four names near buy points with earnings on the horizon: iRobot (IRBT), Mercury Systems (MRCY), Cactus (WHD) and Paylocity (PCTY). IRobot stock, Mercury Systems stock, Cactus stock and Paylocity stock are all trading within 3% of their buy zones.

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Top Stocks To Watch

Paylocity stock leads this group of top stocks to watch with a highest-possible IBD Composite Rating of 99. Mercury Systems stock and iRobot both earn a 98, while Cactus stock has a 95. Top stocks typically have high Composite Ratings as they launch big runs. The Composite Rating looks at key fundamental and technical metrics like earnings and sales growth, relative price performance, return on equity and profit margins.

This week on the “Investing with IBD” podcast, we go into further detail on the iRobot and Mercury trades. Listen to the podcast to hear how investors can make big profits by buying breakaway earnings gaps.

IRobot Stock

IRobot stock is 3% below a 132.98 buy point from a flat base. This tighter base formed after an attempted breakout from a base that was 39% deep, which is something that we’ve seen with a lot of stocks lately. The relative strength line for iRobot stock is closing in on its prior high, which is positive. IRobot earnings are due April 23.

Mercury Systems Stock

Mercury Systems, which reports April 30, is 1% below a cup-base buy point of 67.95. Like iRobot stock, Mercury’s relative strength line is nearing highs, too. The defense stock gapped up on two of its last three quarterly reports.

Cactus Stock

Oil and gas equipment maker Cactus is 2.7% below a 38.78 buy point from a cup-with-handle base. The 2018 IPO is still trading below its all-time high of 40.97, but the relative strength line is closing in on recent highs. See if the RS line can climb above its short-term high if the stock breaks out. Earnings will be released on May 2.

Paylocity Stock

Paylocity stock staged a breakout over a 91.71 cup-with-handle base on April 16, but the stock is hitting resistance at the buy point. Shares are currently 2.9% below the entry. Like iRobot stock, Paylocity’s base formed after the stock attempted a breakout over a cup base with a depth of 40%. Earnings are also due May 2.

Buying Earnings Gaps

If a top stock to watch breaks out of a base on its quarterly earnings report, that’s a buying opportunity. Even if we see a breakaway gap and that stock becomes extended from the standard 5% buy zone, it’s still a buying opportunity.

In that case, investors should look at an intraday chart and see if the first five-minute bar looks strong. It would also be ideal to see the stock close in the upper half of its trading range for the day. Buying on a breakaway gap might seem counterintuitive, but our research shows that this action is often the precursor to further gains for top stocks.

Please follow Alissa Coram on Twitter at @IBD_ACoram for technical analysis and stock market updates.

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