The market dropped back into correction territory this week with an ugly sell-off, with the S&P 500 falling to a three-month low. For now, investors should build their watchlists for a rebound and focus on stocks with strong relative strength lines. META stock, General Electric, Arch Capital Group, Vertex Pharmaceuticals and Bunge are worth keeping an eye on from the sidelines as they show resilience.
The names included on this week's list of stocks to watch are all nearing buy points. But investors should wait for evidence that a new market rally has real momentum, with a follow-through day to confirm the uptrend. If the major indexes continue to slide, even the most resilient stocks will buckle.
Meta
Facebook parent Meta Platforms is on the IBD Leaderboard list of leaders near buy points. The tech behemoth is among the many companies planning to integrate artificial intelligence into its business. In August, Meta rolled out its Code Llama with Microsoft, a large language learning model (LLM) that can use text prompts to generate and discuss code for research and commercial use.
Meta kicked its losing streak of six consecutive earnings declines with its Q2 results in late July. The company topped estimates with a 32% earnings jump to $2.98 per shar. Revenue rose for the second quarter in a row, accelerating 11% to $32 billion.
For the full year, analysts expect EPS to more than double, signaling huge gains in the second half.
META stock wedged higher in light volume for several weeks to mid-September, following the 50-day moving average. So a recent pullback offered a constructive pullback. Meta is now trading in a cup-with-handle base with a 312.87 buy point.
Shares swung 1.1% higher Friday to 299.08, but failed to close back above the 50-day line.
META stock has a near-perfect 98 Composite Rating out of a best-possible 99. The Composite Rating combines various technical indicators into one easy-to-read score. The internet giant has an 86 EPS Rating. The stock's relative strength line climbed to a 52-week highs and it has a 98 RS Rating.
Meta soared nearly 148.5% year-to-date.
General Electric
The S&P 500 conglomerate is on its way to becoming a pure aerospace play by early next year as part of its breakup strategy. General Electric is splitting into independent energy, health care and aviation companies in 2024 after shedding various assets ranging from lighting to locomotives. In January, the company spun off GE HealthCare Technologies, which trades on the Nasdaq.
General Electric's earnings increased by double digits in the past three quarters while the company's sales growth accelerated in the last four quarters.
GE stock nearly broke out from a tight flat base on Wednesday, but reversed lower. Shares fell 3.7% to undercut the 50-day line in an outside week. The current pattern has a 117.96 buy point, MarketSmith data shows. The buy zone, which stretches 5% beyond the buy point, extends to 123.85.
GE stock has a 94 Composite Rating and an EPS Rating of 76. General Electric's relative strength line is near year-highs with a 97 RS Rating.
GE stock rallied 70% in 2023.
Arch Capital Group
Bermuda-based Arch Capital provides property, casualty, specialty, mortgage and other insurance offerings to customers in North America, Europe, Bermuda and Australia. Its products cover a variety of industries, as well as typical life, accident and health insurance, and specialty coverage for cyber, terrorism and political risk.
A number of insurers are doing relatively well as defensive plays in the market. And Arch Capital's recent growth is pretty strong.
The company averaged 56% earnings gains over the last three quarters, although growth decelerated during that time period. Revenue growth averaged 38% over the past four quarters, swinging between 14% and 63%.
Arch Capital "stands to be one of the biggest beneficiaries of a hardening P&C (property and casualty) pricing cycle, given its depth and breadth of global distribution and underwriting expertise," JPMorgan Securities analyst Matthew Carletti wrote in a research note following its Q2 earnings beat.
ACGL stock ranks in the top 10 of the IBD 50 list and is a member of the Big Cap 20.
ACGL stock rebounded 1.2% Friday after pulling back from near a buy point Thursday. Shares are trading in a cup base with an 84.83 buy point.
The relative strength line is already at a new high, a bullish sign.
Arch Capital has a perfect 99 Composite Rating. Shares have a 96 EPS Rating. ACGL stock's relative strength line is on the upswing back toward its early-May highs and it has a 94 RS Rating.
Shares rose 29% since Dec. 31.
Vertex Pharmaceuticals
Vertex Pharmaceuticals is a Boston-based biotech firm focusing on drug treatments for specialty diseases such as cystic fibrosis, sickle cell disease, Duchenne muscular dystrophy and more. The company has numerous drugs up for significant milestones in the near future.
Analysts expect Vertex to have results for three final-phase studies of a next-generation cystic fibrosis treatment in early 2024. Meanwhile, the company is expected to wrap up several studies for a pain drug this year, as well as a Phase 2 study for a kidney disease drug. Data from its type 1 diabetes program are also due at its fall meeting.
Vertex earnings rose in three of the past four quarters and it averaged 14% revenue growth during that time.
VRTX stock rebounded from near its 50-day line during the week, but pulled back to close just below the key level Friday. Vertex is trading in a two-month flat base with a 367 buy point. The Sept. 20 high of 358.59 offers an early entry.
The RS line is at consolidation highs.
VRTX stock has a 91 Composite Rating and an 89 EPS Rating. Its relative strength line is off its highs from early May and Vertex has an 84 RS Rating.
Shares swung 21% higher this year.
Bunge
Bunge is a leader in the agribusiness and agricultural commodities industry that produces a variety of specialty oils, food ingredients, milling products and fertilizers. The St. Louis, Mo.-based company has 300 facilities across more than 40 countries. It touts itself as the world's largest oilseed processor, a top vegetable oil seller, and major fertilizer producer and supplier to farmers in South America.
Bunge reported a 25% earnings increase to $3.72 per share for its Q2 results at the beginning of August. Analysts expected earnings of $2.69 per share. The results ended a three-quarter streak of consecutive declines. However, revenue declines accelerated the past two quarters.
BG stock ranks second in the Agricultural Operations Group according to the IBD Stock Checkup.
Shares are trading in a flat base with a 116.59 buy point as part of a base-on-base formation. BG stock broke out from a cup base on July 25 but started to pull back after hitting its 2023 high of 116.59 on Aug. 7.
Bunge stock fell 2.5% Friday to drop below its 50-day line.
BG stock has an 88 Composite Rating and a 93 EPS Rating. Bunge's relative strength line dipped Friday, but it still has a strong 91 RS Rating.
Shares rose nearly 11% in 2023.
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