Does the stock market have you down? It’s no surprise if you answered yes. But you may be surprised to learn that despite headline worries and volatile price action, top stocks Roku (NASDAQ:ROKU), Shopify (NYSE:SHOP) and Chipotle Mexican Grill (NYSE:CMG) are leading the market higher and in position to be bought. Let me explain.
In some respects it’s been a tough month for investors. The S&P500 is off roughly 5% as the market closes out August after striking an all-time-high at the tail-end of July. And some former top stocks such as Netflix (NASDAQ:NFLX) and Apple (NASDAQ:AAPL) have really taken it on the chin over the same period.
Of course, there’s seemingly good reasons for the more cautious behavior. You can barely go a day with headlines alerting us to an escalating trade war or weak global data and an inverted yield curve warning of a looming recession for the U.S. economy.
Investors have another reason to be fearful as well. With August wrapping up, the market is moving into the seasonally sketchy calendar months of September and October. But despite all of this bearish overhang, there are reasons to be optimistic and ready to buy new top stocks which can lead the market higher.
The fact is away from the headlines catching most of Wall Street’s attention, the broader market signaled a bullish technical-based follow-through day on August 13th. Historically, most every significant market rally has begun with this type of bottoming action.
It’s equally important to keep an eye on what a new crop of top stocks are doing after a follow-through day. And if those stocks continue to lead the market higher by leaps and bounds, that’s reason to be positive. In the following let’s take a look at top stocks Roku, Shopify and Chipotle on their price charts and see if these market leaders are still worth buying.
Top Stocks #1: ROKU Stock
Roku is the first of our top stocks. The popular hardware platform for watching streaming video on demand content has continued to make new highs following its recent earnings blowout a couple weeks back.
Many will argue ROKU stock is too expensive. But for this type of growth and the company’s position within this secular market trend, it’s not.
Currently and as the illustrated weekly chart shows, shares of ROKU have rallied strongly past this top stock’s most recent weekly base breakout in mid-July. That purchase wasn’t without incident. Nevertheless, a hold of angular support followed by an earnings-driven gap to fresh highs and additional momentum have shares roughly 30% above the base’s breakout.
My advice on ROKU stock is to buy shares if new highs are made. I’d suggest sticking with a 10% stop-loss. Optimistically and without being too hopeful, there’s room for today’s aggressive price action to continue making shares of this top stock out of reach for the masses and plenty of profits for your trading account.
Top Stocks #2: SHOP Stock
Shopify is the next of our top stocks to put on the radar. The e-commerce upstart blasted views and raised guidance in early August. SHOP stock saw some market-driven backing and filling after the report’s initial breakout from a jagged-looking weekly base. But that short-lived price action was quickly reversed and shares of this top stock have been trending higher ever since.
Most recently, on Tuesday broker Rosenblatt lifted its price target on shares from $410 to $481 for this top stock. Analysts cited strong expectations for the Shopify Fulfillment Network.
With this top stock trading near its all-time-highs, the analyst call represents upside of roughly 19% over the next 12 months. That’s a nice yearly return for the broader market, but for a volatile growth stock like SHOP, investors should look to do better.
My suggestion for this top stock is to put shares on the radar and wait for a stronger opportunity within the trend. With Shopify’s weekly stochastics having diverged counter to the rally, the interpretation is SHOP stock is a better pullback candidate to buy versus purchasing momentum.
Top Stocks Short #3: CMG Stock
The last of our three top stocks to buy is Chipotle. The story both off and on the price chart over the past couple years has changed dramatically for CMG stock.
Things started off more than a bit bad for Chipotle bulls as relentless food poisoning scandals sent shares tumbling for more than two years. But lessons learned and investors willing to forget have led to a triumphant turnaround for this top stock.
Now and with today’s brokerage enthusiasm for the fresh-fast operator’s pending nationwide carne asada offering, you could say it’s all bull, every which way you look in CMG stock. And I like what I’m seeing.
Technically, the complete about-face in shares over the past four years has CMG about 10% above its 2015 high which marked the starting point for a massive cup-shaped base. That’s considered to be slightly extended by many investors that focus on breakouts. However, with CMG managing to constructively buck the market’s volatility of the past month by establishing a tight series of higher lows and highs—the price action is more than a bit promising.
My suggestion? I’d propose buying CMG stock on price momentum confirmed by a bullish crossover signal of the weekly stochastics indicator as long as it remains in overbought territory. From there, I’d set my sights on profit-taking near $1000, but appreciate momentum’s alter ego and trail the position with an 8% stop-loss.
Disclosure: Investment accounts under Christopher Tyler’s management do not currently own positions in securities mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.
