We’re heading into some lighter trading days with the Thanksgiving holiday and the official opening of the Holiday Shopping season. Today’s Three Big Stock Charts looks at a few stocks that have gone parabolic in the month of November and asks “can these stocks go higher?”
Three stocks that are on our “Rocket List” are Best Buy Co Inc (NYSE:BBY), Darden Restaurants, Inc. (NYSE:DRI) and Automatic Data Processing (NASDAQ:ADP), as each of these companies have taken the recent rally to the next level by going parabolic in their ascent.
Best Buy Co Inc (BBY)
Best Buy is a perennial seasonal play around the holidays based on the obvious. This year though, the company hit the Street with better than expected earnings in early November, which put the shorts and analysts on their heels.
The company had a short interest ratio of 10.1 ahead of the earnings announcement, which means that the positive results forced a short squeeze to help the 10%-plus rally. Despite the breakneck speed, the charts suggest there’s more to come.
The recent climb in Best Buy stock has taken it outside of its top Bollinger Band, meaning that the stock is likely to continue to a volatile move higher.
In addition, the stock has broken above the $45 level. This price has been chart resistance since 2010. This break will gain the attention of the long-term traders that who want to add to Best Buy as it threatens to make its way to new highs at $60.
Darden Restaurants, Inc. (DRI)
We’re heading out to eat after the election is over, or at least that’s what the reaction of Darden and other restaurant stocks suggests. Darden shares have enjoyed a 15% rally after the election as consumer discretionary stocks have benefited from the conclusion of the election.
The bump in price is also the result of a short covering rally, as there were more than seven times the average daily volume of Darden stock tied up in bearish bets. These bears had to run to the market to cover their losing bets, but there’s more coming.
60% of the analysts covering the stock have it ranked a hold or lower. This as the stock is tearing up the market and making new all-time highs. We’re expecting to see the parabolic move attract the attention of analysts, who will begin upgrading shares and driving more buying.
The overbought condition created by this rally may present a short-term pullback, but this will quickly be reversed as investors on the sidelines will step in as buyers.
Automatic Data Processing (ADP)
Employment data has been on the rise and the payroll processing companies like ADP are benefiting. The company provided a positive earnings report and outlook on Nov. 2 which started the 11% rally that now has shares moving back to new all-time highs.
ADP has been on our “Target Buy” list for more than two years based on the fundamental strength having to do with the employment market’s improvements. In addition, the chart has been one of the stronger in the Nasdaq 100.
A relative strength leader, ADP shares have now embarked on a relatively volatile rally. We say “relatively” because the daily moves have been careful to not breach the upper Bollinger Band, which could trigger a potential slowdown in the rally. This is a positive for the health of this fast-moving rally.
ADP shares continue to maintain their long-term bullish trend that has acted as support for the shares. Intermediate-term trends remain strong as well. The 50-day moving average for ADP just recently moved into an ascending pattern. This suggests that the stock’s three-to-six-month outlook has improved based on the trend and distribution of the daily price changes.
We also love the fact that only 20% of the analysts tracing this stock have it ranked a buy. With ADP breaking to new highs, the shares are certain to garner upgrades from Wall Street, which means more buyers in the mix for even more technical and price strength to come.
As of this writing, Johnson Research Group did not hold a position in any of the aforementioned securities.
