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A number of top Zacks Ranked stocks continue to set up for higher prices, even as the year nears an end. For those who are still trading as we enter the holiday season, I recommend checking out these two stocks that are forming momentum trading setups.

The Gap

Well-known for its timeless apparel and with 3,500 retail shops world-wide, The Gap (GPS) has enjoyed an impressive performance YTD, as EPS have shown upside surprises for the last three quarters. Successful promotions and falling freight costs have increased margins, showing a 260-basis point expansion in the third quarter.

Analysts have been raising earnings estimates over the last two months, contributing to The Gap’s Zacks Rank #1 (Strong Buy) rating.

Current quarter earnings estimates have been upgraded by 25%, while FY24 have jumped by 64%, and FY25 by 37%. Sales growth is expected to remain flat over the next two years though, so earnings growth is primarily expected to be driven by continued margin expansion.

Over the next 3-5 years EPS are forecast to grow by 12% annually.

Image Source: Zacks Investment Research

After gapping significantly higher following Q3 earnings results, GPS stock has continued to drift higher. Now over the last two weeks, price action in The Gap stock has been building out a tradable consolidation pattern.

If the price can breakout and close above the $21.50 level, it would signal a technical buy signal. Alternatively, if the price can’t hold above there, or trades below the $20.50 level of support, investors may want to look for opportunities elsewhere.

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Workday

Workday (WDAY) is a cloud-based software company specializing in enterprise resource planning (ERP) and human capital management (HCM) solutions. Workday's platform is designed to assist organizations with various aspects of workforce management, including HR, payroll, finance, and planning.

The company's innovative cloud-based approach allows for scalable and flexible solutions, catering to the evolving needs of businesses.

Workday expects steady sales growth over the next two years, with a forecast of 16% YoY increases over the next two years. EPS are also expected to grow at a nice pace, with analysts projecting annual growth of 26.5% over the next 3-5 years.

WDAY also has a Zacks Rank #2 (Buy) rating, reflecting modest increases in its earnings estimates. Curernt quarter earnings estimates have been revised higher by 1.4% and FY24 by 2.2% over the last two months.

Image Source: Zacks Investment Research

Like The Gap, Workday stock experienced a heft gap higher following Q3 earnings and have been trading sideways to higher since then. These are fantastic momentum trading setups.

If WDAY stock can trade above the $276.50 level, the price should rally to new highs. However if it breaks out and reverses immediately, or moves below the $270.50 level of support, the setup is invalid and investors may want to wait for another buy signal.

Image Source: TradingView

Bottom Line

While many traders may have already wrapped up their year, there are still opportunities in the market. However, if 2023 has been good to you already, it may be wise to size down so as not to give back any of your well-earned gains. 

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