5 Stocks to Buy With Great Charts

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stocks to buy - 5 Stocks to Buy With Great Charts

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When it comes to investing, everything matters. The fundamentals matter. The stock needs to be undervalued or fairly valued relative to its long-term growth prospects. The optics matter. There needs to be a reason why investors will want to buy the stock for the foreseeable future. And, yes, the technicals matter. The chart needs to support the bull thesis.

In this gallery, we will focus on the last of those three characteristics. Specifically, we will be looking at five stocks that have great charts.

But, we won’t neglect the other two characteristics, either. In other words, we are going to look at five stocks that have great charts, and are simultaneously supported by favorable fundamentals and optics. Why? Because when great charts converge on favorable fundamentals and optics, you usually get a winning stock.

Without further ado, then, let’s take a look at five stocks to buy with great charts — and strong fundamentals and optics, too.

Stocks to Buy with Great Charts: Okta (OKTA)

First up, we have a momentum cloud stock, Okta (NASDAQ:OKTA), which was killed amid the massive September shift from momentum stocks to cloud stocks. And its fundamentals, optics and technicals all say it should bounce back in a big way soon.

Let’s start with the chart. Throughout the summer of 2019, OKTA stock was forming a bearish head-and-shoulders pattern. Indeed, that head-and-shoulders pattern ended with a big plunge at the end of the summer. But, it appears that this head-and-shoulders pattern has now fully played out. That is, the stock has retraced its way all the way back to the starting point of that head-and-shoulders pattern. OKTA stock appears to be finding support there. It also should find support at the 200-day moving average, which happens to be right around the same level.

The technical picture implies that the worst of the recent OKTA selloff is over, meaning the coast is clear to buy the dip.

On the fundamentals side, Okta is a big growth cloud security company. It has been, still is and will remain a big growth company with big margins, supported by secular tailwinds in cloud, cybersecurity and the internet of things. Nothing about this secular growth narrative has changed over the past few weeks. As such, the fundamentals remain robust here and support further upside in OKTA stock.

On the optics side, the momentum-to-value shift which materialized in September won’t last forever. History says it will end, and soon. When it does, the optic backdrop will improve and provide support for a rebound in OKTA stock.

General Electric (GE)

Next up, we have a beaten up industrial giant, General Electric (NYSE:GE). GE’s fundamentals, optics and technicals all imply it could be on the verge of a meaningful breakout.

Let’s start with the chart. There is one very important thing to watch here — the 50-day moving average. Specifically, after spending several months sharply below its 50-day moving average, GE stock is on the verge of breaking above the 50-day moving average in a meaningful way. GE stock has only done this once before, back in early 2019. That breakout above the 50-day following a long stint below the 50-day led into a big, multi-month rally in GE stock. The same thing could happen this time around.

On the fundamentals side, GE’s depressed fundamentals are starting to improve. This breaks down into three things. First, the global economy appears to be stabilizing, and that should provide an upward lift for economically sensitive stocks like GE. Second, GE continues to simplify its operations with asset sales and business divestitures — moves which create more visibility towards sustained profitability in the long run. Third, GE also continues to reduce its debt load, which ultimately reduces operational risk in the long run and should result in continued multiple expansion for the stock.

When it comes to the optics, those look good, too. GE is a very economically sensitive stock. No one wants to buy this stock when the economy appears to be decelerating. But, signs are starting to emerge that the global economy is actually improving, and there’s a fresh wave of European Central Bank and U.S. Federal Reserve stimuli on the way which should help improve things even further. As such, over the next few months, the global economic outlook should improve.

In response, investors will buy into beaten up, economically sensitive stocks like GE.

The Trade Desk (TTD)

Much like Okta, programmatic advertising leader The Trade Desk (NASDAQ:TTD) is a momentum growth stock which: 1) was damaged meaningfully in the recent pivot out of momentum stocks, and 2) looks ready to rebound in an equally meaningful way.

The chart here looks compelling. Since January 2018, TTD stock has formed a solid uptrend. Amid this uptrend, the stock has dropped into technically oversold territory (as defined by a Relative Strength Index reading below 35) only a few times. Each time, TTD stock bounced back from those oversold conditions over the subsequent few weeks to months. Right now, TTD stock finds itself in similar oversold territory. History says what comes next is a sizable rebound rally.

It helps that the fundamentals for TTD stock remain very robust. This company is a leader in the field of programmatic advertising, which automates the ad transaction process using data and algorithms. This is a secular growth industry supported by the fact that all processes across the globe are becoming data-driven, automated processes. Nothing about this favorable secular growth narrative has changed recently. Indeed, the last thing we heard from the company was a double-beat-and-raise second-quarter print that showed continued robust revenue growth, margin expansion and profit growth.

When it comes to the optics with TTD stock, investor demand should return soon. As mentioned with Okta stock, history says that significant momentum-to-value shifts don’t last very long, and when they come to a close, they ultimately result in a big rally for momentum stocks. I don’t see this time being any different. As such, current weakness in TTD stock should end with a significant rebound rally.

Pinterest (PINS)

Next up, we have yet another momentum growth stock, Pinterest (NYSE:PINS). PINS has all the necessary ingredients to stage a meaningful rebound here and now.

The technical picture for Pinterest looks very similar to the technical picture of Okta. That is, in late summer 2019, PINS stock was forming a bearish head-and-shoulders pattern. That head-and-shoulders pattern has now fully played out. PINS stock dropped and ultimately found support right around the same level that the head-and-shoulders pattern started. From a technical perspective, it looks like the next few months in PINS stock should be defined by a rebound bid to all-time highs.

On the fundamentals side of things, PINS stock remains supported by favorable growth fundamentals. Pinterest is a unique social media platform with hundreds of millions of users. Those users don’t go to Pinterest for the same reasons they go to Facebook (NASDAQ:FB) or Twitter (NYSE:TWTR). They go to Pinterest for visual discovery and inspiration — two use cases which lend themselves particularly well to ads. As such, Pinterest should have no problem over the next several years building out its ad business. Thus, PINS stock will be supported by robust revenue and profit growth  — the sum of which should keep PINS stock on a long-term winning trajectory.

On the optics side of things, PINS stock should benefit from the fact that its last earnings report was very, very good. Over the next weeks, investors will look for opportunity in the momentum rubble by identifying stocks which most recently had strong momentum. Pinterest had that. Last quarter, the numbers were so good that PINS stock rallied 20% to all-time highs.

Activision Blizzard (ATVI)

Last, but not least, we have video game publisher Activision Blizzard (NASDAQ:ATVI). ATVI stock seems fundamentally, technically and optically positioned for a big breakout rally over the next 12 months.

Starting with the chart, we can see that ATVI stock appears to be in the first few innings of a multi-month technical breakout. Look at the moving averages in the above chart. A golden cross pattern has emerged. The 50-day moving average has poked its head above the 200-day moving average for the first time in several months. This golden cross pattern has emerged only a few times over the past decade. Each time it has emerged in this way, it preceded a multi-month breakout in ATVI stock.

2020 could be a big year for Activision. Next-generation video game consoles from Sony’s (NYSE:SNY) PlayStation and Microsoft’s (NASDAQ:MSFT) Xbox are launching next year, marking the first console refresh cycle in seven years. More than that, these next-gen video game consoles will have cloud gaming capabilities — yet another huge advance in the video game industry. Also, Activision’s game lineup for 2020 should be stellar.

On the optics side, you have a long-term winning stock that went through a rough patch in 2018-2019. Now, the stock appears to be bouncing back from that rough patch. Importantly, it’s bouncing back ahead of what is shaping up to be a big 2020. That’s a pretty compelling rebound story. Thus, I think buying action in ATVI stock should outweigh selling action for the foreseeable future.

As of this writing, Luke Lango was long OKTA, TTD, PINS, FB and ATVI. 


Article printed from InvestorPlace Media, https://investorplace.com/2019/09/5-stocks-to-buy-with-great-charts/.

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