By definition, a market correction means the indexes and individual stocks need to regroup and work through a downtrend. Some stocks will buck the downturn, but most will run into trouble.
The one certainty is that the stock market will eventually rebound and offer up fresh buying opportunities for investors who stay patient and prepared. The IBD Breakout Stocks Index helps identify companies that could be getting ready to move when a new uptrend begins.
Updated and rebalanced weekly, Innovator IBD Breakout Opportunities ETF tracks names on the IBD Breakout Stocks Index. As the stock market indexes look to get back above key moving averages, the BOUT ETF is also in a rebuilding phase.
Featuring stocks across a wide range of industries — from energy and defense to semiconductors, mining and medical — the BOUT ETF is crafting a cup with handle showing a 37.60 buy point.
See All Stocks On The IBD Breakout Stocks Index
Potential Breakout Stocks To Watch In Next Rally
With the market in a downtrend, now is not an ideal time to buy stocks. But it's always a good time to monitor the components of the BOUT ETF, check IBD stock lists and run stock screens. These tools and features help you scour the market for companies that could move when the indexes rebound.
As you look for stocks to buy and watch, keep an eye on the relative strength line. Comparing price performance to that of the S&P 500, a rising RS line indicates stock market leadership.
Rambus, AOSL Stock Lead Semiconductor Stocks Setting Up
Both Rambus and Alpha & Omega Semiconductor are working on cup-with-handle chart patterns in the current stock market correction.
As it tries to retake its 50-day moving average, Rambus eyes a 28.32 entry in a second-stage base. Its RS line is already at a new high 52-week high. The fabless chipmaker has posted three straight quarters of triple-digit earnings growth. Analysts expect the Silicon Valley-based company to deliver a 137% EPS spike this year.
AOSL stock joins Rambus on the BOUT ETF as it also tests its 50-day line while building a cup with handle. The fabless semiconductor stock made the latest list of new buys by the best mutual funds. It also earns a spot on the IBD 50 list of top growth stocks.
Defense Stocks Form Bases As Ukraine-Russia Conflict Mounts
As Russia's invasion of Ukraine puts the world on edge, defense stocks Heico and Transdigm build new buy points.
Aerospace leader Transdigm is again testing resistance right around the 670-680 range. Having regained its 10-week line, Transdigm is testing a 669.13 buy point. In November, the stock undercut the low of its prior chart pattern to reset the base count, making the current formation a first-stage base.
Heico, a Florida-based maker of aircraft components, also recently reset its base count. It's now building a first-stage flat base with a 152.59 entry. Heico has seen a rebound in sales and earnings growth in recent quarters. Analysts forecast 24% EPS growth this year and a 15% increase in 2023.
More Stocks To Watch During Stock Market Correction
The BOUT ETF contains several other stocks, including several with their relative strength lines at new highs. AstraZeneca, Hub Group, Brixmor Property and OutFront Media all fit that bill.
And that's just the tip of the BOUT ETF iceberg. Be sure to review the full list of names on the IBD Breakout Stocks Index. That will help you prepare to profit in the next stock market uptrend.
IBD Breakout Opportunities ETF
The IBD Breakout Opportunities ETF from Innovator Capital Management tracks the IBD Breakout Stocks Index. As with other index ETFs, this fund allows you to essentially invest in the entire index in addition to or rather than buying the individual stocks. Learn more here about the ETF and Innovator funds.
Follow Matthew Galgani on Twitter at @IBD_MGalgani.
