When Wall Street gets in a mood, it’s time to watch out. It’s also true the market can forgive and forget just as quickly. As much, when it comes to deeply oversold and out-of-favor growth stocks Pinterest (NYSE:PINS), Zscaler (NASDAQ:ZS) and CrowdStrike (NASDAQ:CRWD), it’s time to put these names on your radar as stocks to buy today.
While the averages have clawed their way back and into favor with index-focused investors, many risk assets have been left behind. Large-cap tech giants Netflix (NASDAQ:NFLX) and Amazon (NASDAQ:AMZN) are two prolific performers and household names that have largely failed to participate in the market’s current rally.
Sure, there’s company-specific or macro reasons for the treason-like price behavior. There always is. More important, most often those concerns quietly and sometimes quickly disappear — and are then replaced by as easily defendable supports for making yesterday’s whipping boy today’s hottest new toy on Wall Street. So, NFLX and AMZN are stocks to buy?
Personally, I’m not here to defend NFLX or AMZN shares and their varied levels of investor loathing. I’d rather focus on smaller, up-and-coming companies with big-time growth prospects and oversold price charts. These are stocks to buy if you can get past today’s bearish narratives.
Growth Stocks to Buy: Pinterest (PINS)
Pinterest stock is the first of our growth stocks to buy. The wildly popular, web-based visual discovery platform rocketed higher by nearly 19% in early August after smoking earnings forecasts. The bullish price action set the stage for a market-leading, cup-with-handle breakout to fresh all-time-highs. But the classically strong-looking situation wasn’t meant to be.
With nary a price driver to account for the complete unwinding of shares, Wall Street and its often fickle — and sometimes perverse — behavior took the technically-constructive pattern and sent shares into a well-oversold situation that’s tested trend-line support this week.
I recommend that Pinterest is a stock to buy today. Investors should size the position for a 10% stop-loss to minimize exposure and exit if nearby support fails.
ZS stock is the second of our growth stocks to buy. The cybersecurity upstart dropped the ball with reduced guidance for its fiscal year amid worries that Palo Alto Networks (NYSE:PANW) is encroaching on its growth. Oh, the worries.
I’d be quick to point out it’s far from unusual for one quarter’s jeers to be replaced by investor cheer the very next reporting period. And ZS stock is no stranger to this phenomenon, either. Chalk up the reversal in price action to sandbagging, better-than-feared results or any number of reasons — Wall Street has lots of reasons to forgive and forget.
One early sign that investors will eventually reconnect with ZS stock is the price chart. Shares of Zscaler are oversold while filling a bullish earnings gap from two quarters ago. ZS stock is testing its lifetime cycle 62% Fibonacci support level.
My recommendation for this stock to buy is to purchase shares if a confirmed weekly chart bottoming candlestick pattern emerges in the next several sessions while continuing to hold ZS stock’s fallout low of $46.04.
CRWD stock is the last of our growth stocks to buy. CrowdStrike is another cybersecurity play and another casualty of earnings. Unlike ZS stock, CRWD appears to have suffered the curse of overly high expectations and valuation concerns as this growth stock topped estimates and boosted both its earnings and sales guidance. Talk of competition from VMware (NYSE:VMW) also helped shares spiral lower.
Of the three, CRWD stock is the one I’d be most wary of buying. Shares ripped straight through a prior bullish earnings gap and 62% retracement level. CrowdStrike is now testing the 76% level for support. But if this week’s low fails, shares are likely to challenge the June opening low of $56.
My recommendation for this stock to buy is to purchase shares above $72, as long as CRWD can hold $65. Both the entry and exit blend the chart with pragmatism in keeping risk contained to roughly 10% — and keeping investors safely on the sidelines for a more valuable stock to buy if a challenge of the prior low and double bottom pattern are to become a future reality.
Investment accounts under Christopher Tyler’s management currently own positions in Pinterest (PINS) and its derivatives, but no other 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.