The Dow Jones Industrial Average and other benchmarks are breaking out this morning on relatively strong trading. A check of our breakout stocks list brought some familiar names to our attention that deserve a closer look.
Shares of Agilent Technologies Inc (NYSE:A), Darden Restaurants, Inc. (NYSE:DRI) and Costco Wholesale Corporation (NASDAQ:COST) are among the names helping to drive the strong performance today as each of these companies are making moves above key trendline or consolidation levels. These breaks suggest that higher prices await as traders begin to chase these trends higher.
Agilent Technologies Inc (A)
The healthcare sector has been quiet as traders await any ideas on how the regulatory environment and Obamacare may change with the new Trump administration. Agilent set itself outside of the crowd today as the stock broke through technical resistance and into a volatility rally.
A shares are moving above $50 today as the company’s earnings announcement approaches next week. It appears that the market is “buying the rumor on Agilent beating expectations. Something it has done each quarter since May 2015.
Even better, A has been showing revenue growth as the rest of the market has been seeing flagging sales. This puts Agilent in a better light than its peers.
The break above $50 is key as it marks the first time A shares have been above this price since 2001.
Today’s move breaks Agilent above its top Bollinger Band ahead of next week’s earnings, something that is likely to continue as volatility rallies higher right up to the announcement. A shares are heading into a slightly overbought condition, which makes the “trade” relatively clear.
The charts should take Agilent shares higher through mid-week trading after the announcement, then traders should watch for a “sell the news” rally to follow and likely end shares back down at $50, where they will find consolidation support before continuing higher.
Costco Wholesale Corporation (COST)
Another company seeing a breakout today is Costco. The retailer pulled back prior to the holiday season and traded range-bound; however, COST shares have been leading the retail sector since December as they continue a climb.
Today, Costco broke above $170 on no news. In addition, the COST’s earnings aren’t expected until the beginning of March. This means the breakout for Costco is trading driven — something we love to see.
The break above $170 is coming with volatility as COST shares have now broken above their top Bollinger Band. This indicates that we should expect volume and volatility to increase as Costco stock makes its way higher.
How much higher is hard to say as COST shares are now breaking into new all-time high territory. What will help Costco is the fact that the stock saw a 6% increase in short interest in the last reporting period. This indicates that there were traders expecting to see COST stock get rejected at its highs. Now, these traders must correct their short bets by buying the stock back, helping to drive prices higher.
For now, keep eyes on round-numbers as these will be the first targets that traders will act on. Based on that, $180 (a 6% move) is a clear upside target for Costco.
Darden Restaurants, Inc. (DRI)
One final breakout for the day is Darden Restaurants. DRI, the proprietor of Olive Garden, among other eateries, is making a technical move above its 50-day moving average for the first time since breaking below this key trendline on Jan. 6.
The break above the 50-day moving average comes during, you guessed it, a break above Darden stock’s Bollinger Band. This suggests that we are likely to see an increase in the upside volatility of DRI Stock.
The last time that we saw a similar combination of Darden breaking above the 50-day and a top Bollinger Band was in November 2016. This pattern was ahead of a strong rally in DRI shares that took them from $62 to above $75.
For now, watch for some resistance to come in on Darden shares as they trade to $80, as this marks the stock’s all-time highs.
As of this writing, Johnson Research Group did not hold a position in any of the aforementioned securities.
