Stocks To Buy In A Stock Pickers' Market

This is my favorite type of market. When you get this seesaw action back and forth, it can feel like it’s impossible to make money. Indexes move in a positive direction for a few days then reverse and come back down. The trading range becomes tighter and tighter, while the market resists any breakout to the upside or breakdown below. This is the type of market that drives the guys who buy the whole market crazy.

Well I’m not one of those guys. I’m the guy that’s out here finding great stocks to buy while the index moves back and forth. I’m armed with a special kind of ammunition. The sort of heavy artillery the Zacks Rank gives me.

If you want to get out there and find great stocks in any market, you’ve got to look for the stocks that are in strong industries that have strong histories of good earnings and bullish analysts upping their estimates. While the rest of the crowd is just going along with the herd, I actively seek out the strongest stocks in any market.

Here I’m looking for Zacks Rank #1 (Strong Buy) and Zacks Rank #2 (Buy) stocks that have a Momentum Style Score of “B” or better. That way I get exposure to stocks that have had recent earnings surprises, an uptick in volume, and have strength relative to the market. When the market is heading sideways and there are stocks that are breaking down, then there are obviously strong stocks that are breaking out as well. Using this screen I can find those breakout winners.

Cadence Design (CDNS - Snapshot Report)

Cadence Design Systems, Inc. develops, sells, leases, and licenses electronic design automation (EDA) software, emulation and prototyping hardware, verification intellectual property (VIP), and design intellectual property (design IP) for semiconductor and electronics systems industries worldwide.

The push higher since the last earnings report has evolved into an aggressive breakout. Volumes have increased recently and shares seem to have leapfrogged resistance at $22. An overbought commodity channel index (CCI) has cooled off a bit recently, coming down from nearly 300 to 88.21. Below $22 the next level of support is $21.50.

Earthlink Holdings (ELNK - Snapshot Report)

EarthLink Holdings Corp., together with its subsidiaries, provides managed network, security, and cloud services to business and residential customers in the United States. The company operates in two segments, Business Services and Consumer Services. The Business services segment provides data services, including multiprotocol label switching services, Wi-Fi, and high-speed Internet access; voice services, such as local and long-distance services over traditional copper lines, hosted voice, SIP trunking, and integrated voice and data solutions; managed services comprising managed network, security, infrastructure, and cloud services; and professional services to evaluate the performance and security of network.

ELNK shares were in a trading range from $7.50 to $9.50 for the last three months of trading. So the push now towards $9.50 makes me cautiously optimistic. Of course I’m rooting for the breakout here as volumes have increased and the CCI has pushed above 100. You can roll the dice a little on this stock, in hopes of the breakout here but if things reverse and ELNK comes down, I wouldn’t want to ride it all the way back down to support at $7.50. A tight stop on the breakout trade is the way to play this. If shares come back to the bottom end of the consolidation range then you can try to enter at that more favorable price down the road. 

Extreme Networks (EXTR - Snapshot Report)

Extreme Networks, Inc., together with its subsidiaries, provides wired and wireless network infrastructure equipment, software, and services for enterprises, data centers, and service providers. The company offers Black Diamond products, which deliver modular or chassis-based Ethernet connectivity solutions that have a range of management and line cards allowing customers to configure and re-purpose the systems; and Summit product family of stackable Ethernet switching systems, which provide a range of connection speeds, various physical presentations, and options to deliver PoE or unpowered standard Ethernet ports.

This is a stock trading all the way down at $3.87 that appears to be making a run to the low $4s right now. There is a big band of volume that was traded at that price which will act both as a magnet and resistance for this stock. A retest of that level from here would provide for a great short term trading idea. A chance for a breakout above that level make this even more enticing. Support sits below the current price and appears to be centered around $3.50.

Shoretel (SHOR - Snapshot Report)

ShoreTel, Inc., together with its subsidiaries, provides business communication solutions in the United States and internationally. The company offers integrated voice, video, data, and mobile applications based on Internet protocol technologies. It offers solutions, such as ShoreTel Voice Switches; ShoreTel Service Appliances; ShoreTel Director, which enables IT administrators to view and manage the entire system from any location using a single application; ShoreTel IP Phones; and Small Business Edition 100 for smaller businesses. 

This is the most bullish of all the charts here. The stock has gone exponential, rocketing off the lows near $7. A great earnings report has added more fuel to the fire here. Volumes have ticked up significantly as this stock is obviously making its way onto the institutional money radar. The intraday spike down to $8.80 on Monday is the first strong level of support to the downside.

Western Alliance (WAL - Snapshot Report)

Western Alliance Bancorporation operates as the bank holding company for Western Alliance Bank that provides various banking products and related services primarily in Arizona, California, and Nevada. It accepts various deposit products, including checking accounts, savings accounts, and money market accounts, as well as fixed-rate and fixed maturity retail certificates of deposit.

This stock has a tendency to trend for several months at a time, then go sideways in a consolidation. Pretty typical of a bank stock though. Right now, shares appear to be in the midst of a bullish trend as shares probe higher in search of a new fair value. The CCI has been bouncing between 200 and 75 for the last month of trading. As long as there are no negative news events I expect the slow accumulation to continue.

Bottom Line

This is a stock pickers market, so don’t go out there and buy up the whole index. Just check in with your friendly neighborhood stock picker. I’m here to give you some fantastic investment ideas to beat this market. With the Zacks Rank and the Zacks Momentum Style Score to guide you, you’ll be ahead of the curve.

Disclosure: contains statements and statistics that have ...

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