As the market correction continues, Vertex Pharmaceuticals, Cardinal Health and Cheniere Energy are among a handful of stocks to watch showing the strength and resilience required to make the IBD Leaderboard. Four stocks — Paylocity, Shockwave Medical, Wolfspeed and Denbury — have also fought their way onto the Leaderboard watchlist.
Reinforcing the bearish conditions, IBD Leaderboard and the watchlist have shrunk to just nine names, plus DoubleVerify and Neurocrine Biosciences.
These dangerous times call for caution among investors. Since most stocks get pulled down as the market indexes endure an extended downturn, buying breakouts in these conditions is risky.
Investors willing to take that risk should manage both their positions and their expectations. Start with small shares. testing the market, and stand ready to apply sell rules to cut losses if the trade doesn't work.
Relative Strength Reveals Resistance In Down Market
The old joke says you only have to outrun the guy next to you when you're both being chased by a bear. But that's not always the punchline. If the bear is still hungry and you run out of steam, you could also end up on the menu.
There's no question that a superior relative strength line is always important, particularly in a bad market. A sharply-rising RS line means that stock is outpacing the rest of the market, as represented by the S&P 500.
On both daily and weekly stock charts, look at relative strength lines for IBD Leaderboard components like NBIX, VRTX, CAH, LNG, PCTY and others. They have soared to new 52-week highs, or are just shy of that mark.
But the bear tale warns that isn't enough to ensure you're out of the woods. These stocks have earned a spot on the IBD Leaderboard for their strong RS lines and other technical and fundamental factors, but they're not immune to the market's overall troubles.
Let's see how these leaders are currently performing.
Vertex, Neurocrine Among Stocks To Watch Setting Up
While Cheniere Energy is extended from its recent buy point and Cardinal Health is now testing a buy zone it cleared earlier, several other names are setting up potential new moves.
VRTX stock is working on an early stage flat base with a 306.05 entry. Earlier, the biotech broke out over a trendline entry near 292. Its relative strength line has already soared to a new high.
Vertex earns the highest-possible 99 Composite Rating, tying it with Catalyst Pharmaceuticals for top billing among its industry peers. The Medical-Biomed/Biotech industry group ranks an impressive No. 5 among the 197 groups IBD tracks.
With its relative strength line at a new high, Vertex peer Neurocrine Biosciences is looking to clear a 109.36 buy point in a first-stage flat base.
Boosted by four quarters of solid sales growth ranging from 15% to 31%, NBIX stock scores a 97 Composite Rating. While the company is only expected to post 7% earnings growth this year, analysts forecast a 92% EPS gain in 2023.
Featured last month, Paylocity continues to test support and resistance at its 10-week moving average. The stock is working on a new consolidation after a big gap-up on earnings in August.
SWAV stock also gapped up on earnings in August and is now finding support at its 50-day line.
On Monday, DEN stock continued its recent moves back above its 50-day line. Denbury is up around 4% in trading trending slightly above average.
Follow Matthew Galgani on Twitter at @IBD_MGalgani.
