Generac stock, Chegg (CHGG), Monolithic Power Systems (MPWR), Epam Systems (EPAM) and Intuitive Surgical (ISRG) are top stocks to watch this week. All five stocks recently cleared buy points, on the back of huge moves this year.
Chegg and Intuitive Surgical stock were in buy zones in Friday’s stock market. Generac (GNRC), Epam Systems and MPWR stock closed slightly below official buy points, but are still actionable.
Chegg stock and Monolithic are on the IBD 50 list of top growth stocks. Generac is on IBD Leaderboard, a curated list of stocks with the most potential for big gains. Generac stock is on SwingTrader. Epam stock is on IBD Long-Term Leaders.
A solid market rally offers further reason to put the five stocks on your watchlist. Finally, these five stocks hail from different sectors. You want to concentrate in leading stocks, but having some diversification among your leaders is healthy. Further, these stocks range from coronavirus plays (Chegg) to post-pandemic plays (ISRG stock) as well as stocks that aren’t part of either trend (Generac).
The relative strength lines of all these stocks are at or near 52-week highs. A rising RS line means a stock is outperforming the S&P 500 index. It is the blue line in the charts shown.
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. MPWR stock leads this group with a perfect Composite Rating of 99, followed by Generac and Chegg with a 98 each, Epam with a 95, and ISRG stock with a 78. The Composite Rating combines five separate proprietary IBD ratings, based on key fundamental and technical criteria, into one easy-to-use score.
Chegg stock cleared a 90.09 buy point off a cup base this holiday week. The online education stock rallied 5.6% for the week to 92.41, firmly within a buy zone that extends to 94.59, according to MarketSmith chart analysis.
Shares edged lower on Wednesday and Thursday. It’s possible Chegg stock could form a handle just above the buy point, especially after running up sharply over the past several weeks.
Chegg stock has an IBD Relative Strength Rating of 90. That means it has outperformed 90% of all stocks over the past 12 months. The best growth stocks typically have RS Ratings of at least 80.
In October, the online education platform provider posted better-than-expected earnings and healthy Q4 and 2021 guidance. Chegg Study, a $15 monthly cloud-based subscription service, provides coursework help to students online. The company’s focused on international expansion and recently acquired Mathway, a problem-solving app. Chegg’s a coronavirus stock play, as school shutdowns spurred remote learning.
Chegg earns an EPS Rating of 91 out of a best-possible 99. Earnings per share growth averaged 34% over the past three quarters, well above the 25% or higher you would want to see. Over the past three years, Chegg grew EPS 73% annually and sales 30% annually.
Sales growth has accelerated for five straight quarters.
MPWR stock briefly topped a 358.78 cup-base buy point on Wednesday, but reversed lower. For the week, Monolithic Power climbed 2.3% to 356.15. In the prior week, MPWR stock surged nearly 14%, rebounding from its 50-day/10-week line and clearing some short-term resistance in the base.
Investors could start a position now, sizing a position off the 10-week line.
In October, the chipmaker delivered a beat-and-raise quarterly report. Monolithic Power sells energy-efficient power systems for use in telecom, cloud computing, automotive and consumer applications, with big demand by data centers.
MPWR stock owns an EPS Rating of 97 and RS Rating of 88. Monolithic earnings per share growth averaged 28% over the past three quarters. Over the past three years, Monolithic grew EPS 16% annually and sales 17% annually.
Generac stock moved above a 234.65 flat-base buy point on Thursday, closing with a 2.7% gain to 233.20. For the week, GNRC stock popped 7.6%. On Monday, shares leapt 6.2%, rebounding from the 50-day/10-week line and clearing some short-term resistance in the base. Investors could start a small position at these levels for Generac stock, just 6.6% above its 10-week line.
In October, Generac delivered robust and accelerating earnings growth for the third quarter. Sales were up 17% and showed the best gain in six quarters as more people bought power generators to prepare for wildfires and hurricanes.
Generac sports a superior 94 EPS Rating and 91 RS Rating. Generac earnings per share growth averaged 19% over the past three quarters. Over the past three years, Generac grew EPS 19% annually and sales 12% annually.
Epam Systems Stock
Shares briefly cleared a 357.08 flat-base entry last week, closing at 356.34, up 2.7% for the week after testing its 10-week line on Monday once again. In the prior week, Epam stock leapt 7.9%, also briefly breaking out as it rebounded powerfully from its 10-week line. It’s still actionable now, with Epam stock up 6.7% vs. the 10-week line.
The IT services firm is on a hiring spree into 2021 as it expands into higher-margin consulting services through acquisitions.
Epam Systems has an 95 EPS Rating and 78 RS Rating. Epam earnings per share growth averaged 15% over the past three quarters. Over the past three years, Epam Systems grew both EPS and sales 24% annually.
ISRG stock rose over a 792.64 flat-base entry, climbing 2.3% to 807 last week. The robotic surgery stock is in a buy zone extending to 832.17. In the prior week, ISRG stock popped 3.8%, just clearing a handle-like formation in the base.
The maker of the da Vinci robotic surgery systems has seen sales and earnings decline as people put off elective surgeries in the pandemic. But the coronavirus vaccine has stirred hopes for a return to growth.
Intuitive Surgical stock earns a 62 EPS Rating and 74 RS Rating. Intuitive Surgical earnings per share fell an average 27% over the past three quarters. Over the past three years, the medical technology stock grew EPS 9% annually and sales 15% annually.
Find Aparna Narayanan on Twitter at @IBD_Aparna.
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