Tech stocks GlobalFoundries, Palo Alto Networks and Wolfspeed are this week's top stocks to watch, as they work on buy points in a challenging market. Paylocity and Arista Networks round out the list.
PANW stock and PCTY stock belong to the IBD Leaderboard watchlist, after strong earnings and guidance. ANET stock belongs to the IBD 50 list of top growth stocks. PSTG stock is on SwingTrader. GlobalFoundries was Friday's IBD Stock Of The Day.
More broadly, amid rising interest rates, most leading stocks flashing buy signals reside in the solar, pollution control or medical space. But these five technology stocks are setting up or moving to set up.
Keep in mind that the market uptrend remains under pressure, making new buys a riskier proposition. But it's a good time to build stock watchlists.
All of this week's top stocks to watch have rising relative strength lines, at or near highs. That means they are outperforming the S&P 500, making them solid choices for your investing watchlist.
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GFS Stock
GlobalFoundries rose 4% in last week's stock market trading, even with a quiet Friday session.
GFS stock remains below a 66.06 handle buy point from a very deep double-bottom base. The pattern began to form Aug. 12 after GlobalFoundries peaked on earnings, following a massive run-up in July.
GlobalFoundries' handle recently found support at the 200-day moving average. Aggressive investors could use a break of the downtrend in the handle — still close to the 21-day line — as an early entry.
Ideally, GFS stock's handle would develop into its own proper base.
In a positive technical sign, the RS line for GFS stock is poised to strike new highs.
New York-based GlobalFoundries is a chip foundry, which means it makes semiconductors for fabless chip firms.
GFS stock debuted on the Nasdaq in October 2021, amid fears that a global chip shortage could persist into 2023 or beyond. It specializes in the less-advanced yet essential semiconductors that drove the chip crisis.
GFS stock shows an IBD Composite Rating of 91 out of 99. It also bears a Relative Strength Rating of 91, meaning it has outperformed 91% of all stocks in IBD's database over the past 12 months.
As a young company with a short history of quarterly profits, GlobalFoundries earns a mediocre EPS Rating of 78 out of 99.
But GFS earnings per share have steadily ramped up, on a sequential basis, over the last three quarters. Revenue growth ranged from 23% to 74% over the same period.
Analysts polled by FactSet expect GlobalFoundries to swing to earnings of $2.61 per share in fiscal 2022 from a loss of 5 cents in 2021.
PANW Stock
Shares of Palo Alto Networks gained 3.2% to 565.77 Friday, rising for a third straight session. PANW stock rose 4.7% for the week.
The cybersecurity stock has formed a cup-with-handle base with a 578.89 buy point. It found support at the 50-day average Sept. 6 and its subsequent break above the 200-day line (and downtrend in the handle formation) offers an early entry.
PANW stock earns a Comp Rating of 94, RS Rating of 88 and an EPS Rating of 95.
The California-based cyber giant recently reported its third straight quarter of accelerating earnings growth. Palo Alto Networks also raised guidance and declared a 3-for-1 stock split.
After the Feb. 24 Russian invasion of Ukraine, Palo Alto said it's monitoring cyberattacks in the region and preparing for any spread beyond it.
WOLF Stock
Wolfspeed rallied 2.6% to 114.21 Friday. WOLF stock gained 4.9% for the week.
Another semiconductor manufacturer, Wolfspeed has been consolidating with a 123.35 buy point after an earnings gap-up Aug. 18. This move could be treated as a handle in a longer consolidation going back to late March or even late November.
Arguably, shares are flashing an early entry from breaking a downtrend of the "handle."
WOLF stock has an 88 Comp Rating, 96 RS Rating and 59 EPS score.
In August, the North Carolina-based chip company issued a revenue forecast that topped analysts' estimates.
Earlier this year, Piper Sandler analyst Harsh Kumar called Wolfspeed a top chip stock for 2022. He expects the tech stock to benefit from the global adoption of electric vehicles, which tend to use far more chips than traditional cars.
PCTY Stock
Paylocity shares advanced 3.4% to 258.45 on Friday, climbing for a fourth straight day. PCTY stock leapt 9.6% for the week, rebounding powerfully just above the 10-week moving average.
The move follows three down weeks, which saw Paylocity pull back after an earnings gap-up Aug. 5.
The recent pullback for PCTY stock can be seen as a handle in a long consolidation, offering a 276.99 buy point. It could become its own base in another week.
Paylocity earns a Comp Rating of 95, RS Rating of 95 and a near-perfect EPS Rating of 98.
Over the past five quarters, Paylocity earnings per share grew 39%-74%. Revenue growth ranged between 28% and 37% over the same period.
The provider of workforce management software targets businesses with fewer than 50 employees and stands apart from rivals due its partnership with 401(k) advisors.
A successful breakout back in July 2021 saw PCTY stock rally more than 50%.
Why The Market Rally Is Stronger Than It Looks
ANET Stock
Arista Networks added 1.3% to 124.41 Friday, climbing for a fifth consecutive session. ANET stock advanced 6.1% for the week, which saw it rebound from the 10-week moving average and regain both its 200-day and 21-day lines.
ANET stock eyes a 132.97 handle buy point from a double-bottom base. There is an early entry now from the downtrend of the handle, though it was rather steep. Volume in recent days has been so-so as well.
A provider of cloud networking software and hardware, Arista stock carries a perfect 99 Comp Rating, 94 RS Rating and a 96 EPS Rating.
It shows three quarters of accelerating earnings and revenue growth, capped with a 59% EPS gain and 49% sales increase in the latest period.
This top tech stock is expected to benefit from the growth of data centers. ANET's high-end Ethernet switches speed up communications among racks of computer servers.
For more quality stocks with strong RS lines, check out IBD's Relative Strength At New High stocks list. Stock research platform MarketSmith also has a screening tool to identify stocks with RS lines making new highs.
For other great stock ideas, check out IBD's proprietary watchlists, like the IBD 50 and the IBD Big Cap 20.
