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Vertex Pharma, Atlassian, This Apple Supplier Lead 6 Stocks That Just Undercut Buy Points

February 4, 2018 | By | Reply More

With the S&P 500 index, Nasdaq composite and Dow industrials suffering their worst weekly losses in two years, it’s not surprising that top-rated growth stocks retreated. Vertex Pharmaceuticals (VRTX), Apple (AAPL) supplier Qorvo (QRVO), Atlassian (TEAM), IPG Photonics (IPGP), Paylocity (PCTY) and Cypress Semiconductor (CY) all broke out recently, but in the past week or so have slipped modestly below buy points.

X These stocks are worth keeping on watch lists, in case they retake their buy points, preferably with robust price gains and in strong volume. Keep in mind that the market uptrend is under pressure. Investors should be cautious about new purchases, quick to cut losses and may want to consider taking some profits in winning stocks.

Vertex Pharmaceuticals

Vertex Pharmaceuticals cleared a 167.95 buy point in late January, closing above that level on Jan. 26, but in below-average volume. Shares of the biotech dipped just below the entry. They retook the buy point on Feb. 1 with a 3.7% jump in strong volume. That followed strong earnings and Vertex choosing two cystic fibrosis treatments for late-stage testing. But the stock fell 3.9% to 166.24 in Friday’s market sell-off.

Vertex’s relative strength line, which tracks a stock’s performance vs. the S&P 500 index, has been lagging. (The RS line is the blue line in the charts below.) The lagging RS line reflects the stock’s sideways action during its seven-month shallow consolidation, while the S&P 500 and the broader market rallied strongly.

Vertex is a member of Leaderboard, IBD’s premium service offering annotated charts of a handful of stocks, mostly growth names in or near buy zones.

Qorvo

Chipmaker Qorvo gets an estimated 34% of its revenue from Apple. That may rise further thanks to a big new contract win for the Apple iPhone announced last week.

Qorvo’s stock had been trending lower since early November and its RS line had fallen to a 52-week low as of late last month. But Qorvo shot up 16% on Thursday to 83.34 on the Apple iPhone wind, vaulting above an 81.30 cup-without-handle base buy point. That capped a 26% rally over five sessions.

On Friday, shares retreated 3.1% to 80.77, after Apple itself plunged 4.3% on weak iPhone sales and guiding low on current-quarter revenue. Other Apple chipmakers also sold off.

Qorvo’s RS line is well off the highs of its recent consolidation and late May’s peak, but did shoot up last week with the stock and jump above a short-term high.


IBD’S TAKE: While some recent breakouts are struggling, others have weathered the recent market retreat. Facebook leads five top stocks holding in buy zones.


Atlassian

Atlassian, which makes collaboration software for businesses, cleared a 53.55 buy point on Jan. 16, closing above that level on Jan. 17 and rising as high as 55.91 on Jan. 18, with all three sessions in strong volume. After the Jan. 18 closing bell, Atlassian gave weak earnings guidance after topping fiscal second-quarter estimates.

Shares fell 4.55% to 53.07 on Jan. 19, back below the entry. Since then shares have been hovering just above below the buy point. On Friday, shares fell 1% to 52.72 in light volume.

The RS line is lagging, but not much. A strong retaking of the buy point could not only claim a short-term high but also approach the November peaks.

IPG Photonics

IPG Photonics shot up 6.8% to 258.84 on Jan. 8, part of a 21% surge to start 2018 as it ran up the right side of a short cup-without-handle base. That pushed the stock to the near the top of the 5% buy zone from the 248.33 entry. The fiber laser maker’s RS line almost hit a new high on a daily chart, and did hit a new high on the weekly chart.

IPG’s shares then moved sideways, moving slightly extended from the buy point. Then shares began pulling back on Jan. 24, but in light volume and closing within buy range through Thursday. On Friday, the stock slid 2.1% to 246.75, back below the entry, but on volume that was 51% below normal.

The RS line is now lagging, as the stock has drifted lower over several weeks while the market fared better.

Paylocity

Paylocity is a cloud-based provider of payroll and human resources software, mostly for small- to mid-sized businesses.

The stock cleared a 50.62 cup-with-handle buy point on Jan. 29, but in volume that was only 17% above normal. The RS line cleared a short-term high, but was still near the bottom of its consolidation. Shares kept rising until reversing lower on Thursday. On Friday, shares slid 1.7% to 50.60 in volume that was 26% above normal.

Paylocity is in strong field. Paycom (PAYC) has fallen back into a buy zone ahead of earnings Tuesday nightWorkday (WDAY), which targets larger enterprises, is one of the five leading stocks cited in the IBD’S TAKE above that is still in a buy zone.

Cypress Semiconductor

Cypress Semi closed above a 17.52 buy point on Jan. 20, but in light volume and with a lagging RS line. Two sessions later, the stock fell back below the entry. Cypress moved back into the buy zone on Jan. 29, again in light trade, but then pulled just below the entry once again.

Cypress reported stronger-than-expected fourth-quarter earnings and sales late Thursday and gave bullish Q1 guidance. Shares fell just 1 cent to 17.15 on Friday.

A strong retaking of the buy point likely would push the RS line above a short-term high.

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