Hot stocks have seemed a little less so recently. The stock market remains in an uptrend. But, since May 12, the official status has been “uptrend under pressure.” That is an interim designation. So, the market could just as easily flip back into a confirmed uptrend as it could into “market in correction” status.
One of the best ways to deal with the level of uncertainty is to raise cash and build watchlists. That way, whether it happens sooner or later, when the market does toggle back into an uptrend, you’ll be ready with cash on hand and a list of stocks that are breakout-ready.
One flexible, effective tool for gathering watchlist hot stocks is IBD’s Stock Screener. This screener scans through IBD’s database of stocks and provides a quick list of some of the top-ranked listings with specified technical or fundamental attributes.
To find the stock screening tool, go to the “research” pulldown option in the menu that runs across the top of the Investors.com homepage. On the left-hand side of that list you will see “IBD Stock Screener.” After clicking through to that “Stock Screener” page, there are three pulldown menus across the top of the page. Under the first of those — the “IBD Stock Lists” option — you will find the “Relative Strength At New High.”
Hot Stocks Magnet: IBD Stock Screener
As you would expect, the list turns up some highfliers, like Expeditors International (EXPD), Nam Tai Property (NTP), Cricut (CRCT) and Denbury (DEN). These very hot stocks are outrunning the market and the vast majority of stocks on the S&P 500 by a wide margin. That, in turn, drives the stocks’ relative strength lines — which show a stock’s performance relative to the S&P 500 — to new highs.
Relative strength lines are helpful, particularly in times of market uncertainty, in pinpointing stocks able to climb despite the current set of challenges. The trick is finding a hot stock that is still basing or in a buy range, but with a relative strength line at or near highs.
A quick scan of the current RS screen shows loan servicer and collections specialist Navient (NAVI) sitting just below a 17.81 buy point in a nicely formed three-weeks-tight pattern. The stock has not paused to offer a buy point since its breakout in January.
Shares were up almost 60% from that buy point on Monday. And even with the market on a monthlong pause, Navient was only willing to pause for a three-weeks tight, not nearly long enough for a full-blown base.
As a result, its RS line has pulled back just a shade from last week’s high. Its Relative Strength Rating is a very healthy 93. Investors should do a quick run-through at investors.com to check the stock’s Composite Rating, Earnings Per Share Rating, and to see how its debt-to-equity ratio compares with its peers.
It’s also a good idea to check the company’s website to confirm whether or not it still has earnings due for the quarter. (Navient reported at the end of April.)
Iqvia’s 4-Weeks Tight Pattern
Biopharmaceutical services provider Iqvia Holdings (IQV) is well within a buy range above a four-weeks-tight buy point at 237.57. This hot stock is up a bit more than 21% from a breakout in early April.
Its RS line has trended steadily to new highs since that breakout. Its RS rating remains a passable but modest 82. This is due to almost a year of cautious, stair-stepping gains by the stock as the market rebounded with gusto from its bear market lows.
The stock holds a half-size position in Leaderboard.
Again, check Composite and EPS Ratings. The long-term debt to equity ratio is on the high side at 206%, according to MarketSmith.
Iqvia reported a strong sales and earnings beat on April 22.
Find Alan R. Elliott on Twitter @IBD_Aelliott
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