PANW stock, Zim Integrated Shipping Services and KBR count among this week's top stocks to watch, along with Live Entertainment Nation and Photronics.
Palo Alto Networks and these other stocks are showing relative price strength and setting up, as the market tries to rebound. Several are just below buy points after rebounding powerfully off key technical levels. But in the current wild market, investors should be building watchlists of stocks showing bullish traits, rather than focusing on buys.
In addition, ZIM stock earns a spot on the IBD 50 list of top growth stocks.
On a weekly MarketSmith chart, four of the five stocks have relative strength lines hitting bullish new highs while in bases, indicated by a blue circle at the end of their RS lines. The RS line for Zim shipping stock, the exception, is just below the Feb. 17 high.
A rising RS line means that a stock is outperforming the S&P 500 index. It is the blue line in the charts shown.
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Stock Market Correction: Watch The RS Line
The relative strength line is a quick way to spot winners in any market — up or down.
The Relative Strength At New High stocks list is a great place to look for quality names with strong RS lines. IBD's stock research platform MarketSmith has a screening tool that identifies stocks with RS lines making new highs.
In addition, the best growth stocks have an IBD Composite Rating of 90 or better, out of a best-possible 99.
Most of the stocks to watch this week meet that bar. Zim Integrated Shipping and Photronics stock lead with a perfect Composite Rating of 99 each. They are followed by KBR stock with a 96 and Palo Alto Networks with a 92. Live Entertainment just misses the 90 threshold, with an 89. The Composite Rating combines five separate proprietary IBD ratings, based on key fundamental and technical criteria, into one easy-to-use score.
PANW Stock
The cybersecurity stock surged Friday further above the 50-day moving average, a rare growth stock showing bullish traits in the current market.
On Thursday, PANW stock jumped 13% in choppy but active trade, retaking the 50-day line, as well as the 10- and 21-day lines, after nearing a test of the 200-day line. The gains came as the escalating Ukraine-Russia conflict raised fears of more cybersecurity attacks, after the U.S. accused Moscow of a hack against its Slavic neighbor earlier.
Palo Alto stock's powerful rebound took it within 1% of the 572.77 buy point in a consolidation stretching to late December. The pattern formed mostly below the 50-day line, which is generally not a great sign but reflects resilience in the current volatile market.
The RS line for Palo Alto stock bolted to a record high, according to MarketSmith chart analysis. That's a strong positive ahead of a potential breakout.
The California-based cybersecurity company shows a superior IBD Relative Strength Rating of 95. That means it has outperformed 95% of all stocks over the past 12 months. Palo Alto Networks has a solid EPS Rating of 81 out of 99.
In fiscal 2021, Palo Alto earnings rebounded 26% after it took a pandemic hit the prior year. Wall Street expects PANW earnings to grow a further 19% in 2022 and 24% in 2023, according to FactSet.
Palo Alto Networks looks strong on the bottom line. Sales growth ranged between 28% and 32% the last three quarters, above the 25% or higher level a CAN SLIM investor would want to see. Sales are seen growing 28% in all of 2022 and 22% in 2023.
Palo Alto was flagged by IBD before the Russian-Ukraine conflict sent cybersecurity stocks on a tear. IBD featured PANW stock in a Feb. 10 Stock of the Day column.
Zim Shipping Stock
Shares of the Israeli shipping liner bounced off support at the 10-week line, which offered a follow-on entry around 63.49 after recent breakouts. ZIM stock ended the week just over 10% above its 10-week line, slightly extended even in a stronger market.
ZIM stock has now formed a three-weeks-tight pattern with a 75.30 buy point. That could offer an add-on entry for existing holders. However, the volatile market and looming earnings on March 9 raise the risks.
The RS line for ZIM stock is just below mid-February highs, a positive sign as the broader market tries to recover after a sell-off.
A new IPO stock, Zim Integrated Shipping has a best-possible RS Rating of 99 and an 84 EPS Rating.
Earnings vaulted 743% in its latest quarter as sales jumped 210%. Growth is expected to continue at a triple-digit pace for another couple quarters, before tapering off and then slipping to a decline, FactSet shows.
But earnings will still be far above pre-2021 levels. Zim offers a fat dividend yield with huge payouts expected in 2022.
ZIM stock has been on IBD's radar ever since the shipping company came public in January 2021 amid a container shipping boom. Shipping rates surged amid strong demand for electronics, furniture, bicycles and other goods during the pandemic. Overburdened ports and other Covid-related disruptions further stretched industry capacity.
A member of the prestigious IBD 50 list, Zim shipping stock boasts strong profits and revenue unlike most newly public companies.
KBR Stock
Shares of the provider of security and engineering services also bounced strongly off the 10-week line. That strong rebound in huge weekly volume brought KBR stock to within 3% of a 50.09 buy point in a cup base.
The RS line also bolted to all-time highs as KBR stock eyes a breakout. The moves came with strong earnings.
The stock has a 94 RS Rating and a 91 EPS Rating.
On Feb. 22, KBR announced that earnings per share jumped 35% for the December -ended quarter as revenue vaulted 70%, accelerating for a second straight quarter.
But some tougher quarters may lie ahead.
In 2022, KBR earnings are seen slowing to a 5% gain from 40% growth last year. The slowdown comes as analysts expect sales to fall 10% for the full year, FactSet said.
Live Nation Stock
Shares of Live Nation Entertainment also rebounded strongly from the 10-week to close in on a 127.85 buy point. Live Nation stock is just 2% below the official entry.
But it already cleared a handle-like entry of 121.43 on Thursday.
The RS line rose to record highs as LYV stock nears a possible breakout. Like KBR, Live Nation's moves came with strong earnings.
LYV stock was added to SwingTrader Thursday.
The producer of live concerts bears a 96 RS Rating but a 57 EPS Rating. It's benefiting as a "reopening play" as travel and the economy open up further after the pandemic.
On Feb. 23, Live Nation sharply pared losses for the December quarter as revenue boomed more than 1,000%.
In all of 2022, analysts expect Live Nation to swing to earnings of 82 cents per share from losses of about $8 in 2020 and $3 in 2021. Sales are seen more than doubling for the full year.
Photronics Stock
Shares of the semiconductor equipment maker also rebounded off the 10-week line, briefly topping a 20.02 buy point from a consolidation going back to early January.
PLAB stock staged an ugly reversal after trying to break out Wednesday, but roared back the next day. It ended the week 6% below the entry.
The RS line struck a high along with Photronics stock but remains below pre-pandemic highs.
The maker of photomasks, used in integrated circuits and flat-panel displays, has a near-perfect 98 RS Rating as well as a 98 EPS Rating.
On Feb. 23, Photronics posted a 192% gain for the January quarter on 25% revenue growth. Both beat views.
Analysts expect Photronics earnings to leap 68% in all of 2022 as sales increase 17%. Both earnings and sales growth are seen slowing to single digits in 2023, FactSet says.
"Strong end-market demand trends have continued into 2022," CEO Peter Kirlin said in a Feb. 23 release.
"We've aligned our operations and technology to serve the strongest sectors of the market, such as AMOLED for mobile displays," he added.
Find Aparna Narayanan on Twitter at @IBD_Aparna.
