The market is in its last few weeks of the year, and some investors are already planning their holiday season. While it is true that some market participants have started to take a break from trading, the market is still filled with stocks with established trends. To look for these stocks, we’ll screen using the 100-day simple moving average.
Moving averages are one of the most used technical indicators by traders and investors looking to gauge the market's trend visually. It helps identify if the market is still willing to buy the stock above a certain period price average in a simple glance. If prices trade above a certain average, then that suggests that investors see that prices are still low and expect them to go up - and vice versa. While some may argue that this may be a self-fulfilling prophecy because of how many traders and investors are using it, we can’t deny that it has proven helpful for the longest time.
In this article, we will look at three stocks trading above their 100-day moving average that we think you should be on your watchlist.
AppFolio Inc. (APPF)
AppFolio, Inc. is a cloud business management solution aimed to transform, streamline, and automate critical business operations in the real estate industry. Its solutions are designed to grow the interconnected ecosystem of property managers, property owners, real estate investment managers, rental prospects, and other real estate participants. Its solutions include AppFolio Property Manager Plus, AppFolio’s platform, and AppFolio Property Manager. The company previously integrated AI into its solutions to help property managers enhance residents' experiences under its Realm-X interface.
Should you jump in?
APPF is trading above its previous resistance-turned-support area after hitting a high. Its medium-term bullish trend is intact as it trades above an upward-sloping 100-day simple moving average (blue line). Its 14-day RSI is currently consolidating within its bullish zone. Traders and investors looking to jump into the trend can wait for the price to confirm its new support while its 100-day SMA plays catch-up.
Builders FirstSource, Inc. (BLDR)
Builders FirstSource, Inc. is a new construction and modeling products supplier for the professional markets. The company supplies various structural and related building products, including roof and floor trusses, wall panels, custom millwork and trim, vinyl windows, and engineered wood designed, cut, and assembled for each home. BLDR also offers installation services and software solutions for the building products industry. It recently announced its earnings, showing the company can still beat analyst expectations despite the slow housing market.
Contraction or contradiction?
After a three-month correction that started in July, BLDR has now moved above its 100-day moving average. Volatility is also contracting and forming an ascending triangle, which is usually a sign that the price will make its breakout move in the next few days. The 14-day RSI has formed a trend line following the price’s consolidation. Investors and traders who want to buy into BLDR may wait for prices to break out and establish the proper direction of the trend.
Adobe Inc. (ADBE)
Adobe Inc. is a software company known for some of the most widely used software in the industry, like Adobe Photoshop and Adobe Acrobat. It offers products commonly used in various sectors like Digital Media, Digital Experience, and Publishing and Advertising. The company recently announced its acquisition of the Indian startup Rephrase AI, which developed an AI-powered video creation platform. Adobe aims to integrate this into its cloud video editing platform to enhance its offerings.
Is a correction imminent?
ADBE just made another high and shows some price volatility and momentum exhaustion, a sign that we might see a correction soon. Its 14-day RSI has also breached its overbought zone after dancing around the 70-point mark several times. This move sometimes signals that a potential retracement will likely happen soon, and traders may get a chance to ride its ongoing trend.
Final Thoughts
I find trend-following to be one of the best strategies to make money and build wealth in the market. The critical thing to remember is that while the indicator may look great on paper, there's still a certain amount of “reading the tea leaves” needed for the trade to go your way. Remember, investing requires goal alignment and risk management to ensure that you get the most out of the trend and get out when it shows signs that it is about to end. Or, as various investors in the space like to say, “The trend is your friend until the end when it bends.”
On the date of publication, Rick Orford had a position in: ADBE . All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
