Banking

Five Stocks Showing Tight, Bullish Action Near Buy Points

Pool stock, Dexcom (DXCM), PerkinElmer (PKI), Deckers Outdoor (DECK) and Idexx Laboratories (IDXX) are five top stocks to watch this week, most trading tightly and near buy points.




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A highly rated stock, Pool (POOL) earns a spot on IBD Leaderboard, a curated list of stocks with the most potential for big gains. Pool stock is also showcased in the latest New America column. Deckers stock is on the prestigious IBD 50 list of top growth stocks.

Long-Term Leaders

Pool stock and Idexx stock are both on IBD Long-Term Leaders, a list of stocks with a long history of market outperformance and solid, steady earnings growth. In choppy markets like the current one, such “Steady Eddy” stocks can offer a nice counterweight to the more volatile names in a growth-oriented portfolio.

Four out of the top five stocks have rising relative strength lines, at or just below highs. The exception is Dexcom stock, whose RS line is well off highs but at its best levels in 10 months. 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 Rally: 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.

Pool stock and Deckers stock both boast a perfect Composite Rating of 99. They’re followed by Idexx stock with a near-perfect 98, PerkinElmer with a 97 and Dexcom with a 75. The Composite Rating combines five separate proprietary IBD ratings, based on key fundamental and technical criteria, into one easy-to-use score.

Pool Stock

After strong Pool earnings and guidance July 22, the distributor of swimming pool supplies found support at its 10-week moving average and near the top of a prior base. It’s again in buy range from support off a pullback to the 10-week line, after trading tightly the past several weeks. The 10-week bounce offers a 469.27 buy point and the stock is within buy range from that rebound, which goes to 516.20, according to MarketSmith chart analysis.

The 50-day or 10-week line often is a good place to buy Long-Term Leaders.

Pool’s rebound has it flirting with the 21-day moving average but still below the 10-day line.

Pool stock also has a four-weeks-tight pattern with a 495.32 buy point. That could turn into a flat base after another week.

Amid boom times for the swimming pool industry, POOL stock has tripled off its Covid lows. Much of its revenue is recurring. Nearly 60% of Pool’s revenue derives from spending on things like filters, chlorine and replacement pumps.

The company, which also supplies irrigation and landscaping products, benefited as demand for outdoor amenities rose in a lingering pandemic.

The RS line for Pool stock is below August’s highs. But it shows a long-term uptrend, including a sharp rally for most of 2020.

Covington, La.-based Pool stock has a solid IBD Relative Strength Rating of 86. That means it has outperformed 86% of all stocks over the past 12 months. Moreover, Pool boasts an EPS Rating of 98 out of a best-possible 99.

In 2020, Pool grew earnings 44% amid the pandemic. People spent more time at home and were more willing to spend on pool refurbishments and maintenance. And in all of 2021, Wall Street expects Pool earnings to grow 65%, slowing to a 6% gain in 2022, according to MarketSmith data.

Dexcom Stock

Dexcom is a maker of glucose monitoring systems for diabetic patients. The medical products stock has reached the 20% profit-taking sell zone from a late June breakout past 429.04. But it has been trading fairly tightly in recent weeks, above a spiking 10-week line.

Investors could use 527.20 as a buy point. DXCM stock tried to get above level on Thursday, but reversed slightly lower. On a weekly basis, Dexcom stock has several tight weekly closes, broken up by one modestly down week. Shares rose 0.3% to 520.71 last week.

Dexcom stock owns a superior RS Rating of 91 but a poor EPS Rating of 19. That reflects, in parts, earnings declines in recent quarters, though sales growth ranged between 23% and 49% the last eight quarters. Analysts expect Dexcom earnings to fall 20% in all of 2021, then rebound 40% in 2022.

PerkinElmer Stock

PerkinElmer makes products to identify diseases and visualize data, such as chromatographs and spectrometers. The medical research equipment stock has formed a four-weeks-tight pattern with a 188.50 entry. PerkinElmer stock rose 1% to 182.85, but is well above the 10-week line. This follows an 18% earnings-fueled surge in July.

PerkinElmer stock has a solid 91 RS Rating and a superior 98 EPS Rating. Earnings doubled in 2020 amid the coronavirus pandemic. The company makes Covid kits that labs use for testing. Many airlines and countries require negative real-time PCR tests from travelers.

Analysts see PerkinElmer earnings growing a slower but still strong 20% in 2021, then falling 37% in 2022 as the Covid boost tapers off.

Deckers Stock

The footwear company owns top-notch brands including Ugg boots, Teva sandals and Hoka One sneakers. Shares of Deckers Outdoors have formed a three-weeks-tight pattern with a 444.58 buy point, above the 10-week line. Deckers stock fell 2.7% last week to 423.35, less than 4% above the 10-week line. This follows a successful late June breakout from a flat base.

Deckers stock has a 93 RS Rating and an unbeatable 99 EPS Rating. Earnings rose in 2020 as people stuck at home, or seeking the outdoors during the pandemic, sought out its iconic footwear. The Hoka One sneaker brand has especially driven earnings growth. Analysts expect Deckers earnings to grow a further 17% in fiscal 2022 and 18% in 2023.

Idexx Laboratories Stock

Idexx makes products for pet and livestock diagnostics, related software, and water quality testing. Shares traded tightly and then found support at the 10-week line. Investors could use Friday’s high of 681.25 as entry point. Idexx stock also has a newly formed flat base with a 707.05 entry. Shares fell 2% to 668.27 last week.

Idexx Laboratories stock earns a strong 90 RS Rating and a top-notch 96 EPS Rating. Earnings surged in 2020, amid boom times for the pet industry with the pandemic boosting pet ownership. Analysts expect Idexx earnings to increase a further 29% in 2021 and 13% in 2022.

Find Aparna Narayanan on Twitter at @IBD_Aparna

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