CrowdStrike, Zscaler, Snowflake, Oracle and Palantir make up this week's stocks to watch, all trading near buy points.
All five software makers have stakes in the artificial intelligence field, whether it's cybersecurity, data analytics or defense projects. AI remains the hottest trade and it's helped these companies' sales and earnings flourish.
Friday's market sell-off pushed these lower. Yet, the five remain near entries and are stocks to watch.
All have a 21-day average true range (ATR) below 5%. The average true range, available on IBD MarketSurge, gauges the characteristic breadth of a stock's behavior. Stocks with a high ATR tend to make large price moves that can trigger sell rules. Stocks with lower ATRs tend to make more incremental moves.
Oracle Stock Tests Trendline Entry
Oracle stock is rebounding after ceding much of its 36% post-earnings surge on Sept. 10. Shares on Friday briefly rose above a trendline across the highs from that peak, giving investors an early (and momentary) entry coinciding with the 300 price level.
The software leader hosts its annual customer conference next week in Las Vegas, where the company is putting a heavy emphasis on artificial intelligence. It even renamed the event AI World from CloudWorld.
Oracle's Sept. 10 rally (its best day since 1992) came not so much on the company's quarterly results — which missed views — but its backlog of nearly $500 billion in contracted revenue for AI work.
OpenAI said last month that it would work with Oracle and SoftBank to build data centers in Ohio, Texas, New Mexico, plus a Midwest site to be named later. Oracle will develop the sites and rent the cloud-computing capacity through its Oracle Cloud Infrastructure division to OpenAI.
The stock tumbled as much as 7% Tuesday to near the 50-day moving average Tuesday after The Information reported Oracle is getting thin profit margins on the cloud servers it rents to AI startups. Worries over the company's costs to meet AI demand were one reason shares faded from the Sept. 10 surge.
While shares reversed lower on Friday, they rose 2.4% for the week.
Oracle has an IBD Composite Rating of 92, fourth highest in the database software industry group. It has an ATR of 4.76%, according to MarketSurge.
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Zscaler Climbs Above Buy Point
Zscaler edged above the 318.46 buy point of a cup-without-handle base Friday morning, but reversed lower. The stock may need to gather itself before making a stronger move to new highs.
ZS stock still rose slightly for the week, rebounding powerfully Wednesday from the 21-day after tumbling Tuesday.
On the plus side, Zscaler's cup base has a classic shape, and the Accumulation/Distribution Rating has jumped from E a month ago to B+ today.
Zscaler provides cloud-based cybersecurity software. It is a major player in corporate network security, including so-called Secure Access Service Edge, or SASE. A Jefferies analyst said in a note to clients last week that industry checks show Zscaler and Palo Alto Networks are the top picks among customers for SASE. Jefferies has a buy rating on Zscaler.
With a Composite Rating of 96, Zscaler is the No. 3 stock in the cybersecurity industry group. It shares the highest EPS Rating (98) in the group with Palo Alto Networks.
The company has a three-year EPS growth rate of 66% and three-year sales growth rate of 34%, according to the IBD Stock Checkup. Earnings climbed 18% to 40% the past four quarters, while sales rose 21% to 26%.
Zscaler has an ATR of 3.20%.
CrowdStrike Near Handle Entry
CrowdStrike stock is trying to break out of a shallow cup-with-handle base, but hasn't been able to stay above the 507.20 buy point. Shares have met resistance around 500 and 518 this year, making those important levels to watch.
On Friday, shares hit 517.41 before reversing for a 3% decline to 493.79. Shares edged higher for the week.
The stock jumped nearly 13% Sept. 18 after the company gave bullish fiscal-year guidance. It reiterated that net annual recurring revenue will reaccelerate to 40% or more growth in the second half of the fiscal year ending in January. It predicted 20% or better for the next fiscal year.
Analysts cheered the update, with several raising price targets.
Wedbush analysts called CrowdStrike the "gold standard" in cybersecurity, with its new AI products positioning it to lead the cybersecurity industry in agentic AI, Dow Jones Newswires reported.
CrowdStrike in August acquired Onum Security, a provider of technology to analyze data from remote sources that can "stop breaches at the speed of AI," CrowdStrike said. In September, it announced the acquisition of AI security firm Pangea Cyber for $260 million.
Austin, Texas-based CrowdStrike was in the headlines for all the wrong reasons in July 2024, when a faulty software upgrade caused millions of computers to crash. The outage disrupted travel, health care and multiple other industries with losses estimated at more than $5 billion.
The stock sold off more than 45% over three weeks but was back above its precrash level in November. Today, CrowdStrike has a Composite Rating of 92 and ATR of 3.43%. It is the No. 4 stock in IBD's computer security industry group, per IBD Stock Checkup.
Palantir Another Stock To Watch
Palantir stock has been trying to break out of a cup-with-handle base with a 185.75 buy point. It's been a slog lately for the stock, even though it remains above the 21-day exponential moving average. The base is a late-stage pattern, making it more vulnerable to a failed breakout. Shares have soared more than 1,600% from a first-stage breakout in May 2023.
On Oct. 3, shares tumbled 7.5%, triggering a sell signal. That sell-off came after reports that a prototype battlefield communications network being developed by Palantir and another company has security flaws.
Palantir and its project partner, Anduril Industries, responded that the issues raised had been resolved, and that reports reflected an outdated snapshot of the program.
Shares bounced back, but not enough to close above the buy point. On Friday, shares briefly cleared the 185.75 level again before skidding 5.4%, back below the 21-day line.
Denver-based Palantir is both a defense and AI company. It provides data analytics tools used by the Pentagon for intelligence gathering, counterterrorism and other military purposes. It also has contracts with commercial businesses. Palantir has expanded into AI with tools to automate and monitor their operations.
The Trump administration's plans for a "Golden Dome" missile defense shield could mean more business for the company. It's already one of the companies awarded an Army contract to develop the Next-Generation Command and Control system for battlefield communications and decision-making.
Palantir has a Composite Rating of 99, the highest of about 120 companies in the enterprise software industry group. EPS climbed 43%, 75%, 63% and 78% the past four quarters, while sales accelerated 30%, 36%, 39% and 48%.
Palantir has an ATR of 3.92%.
Snowflake Breakout Melting
Snowflake stock poked above the 249.99 buy point of a flat base this week, but fell below on Friday. The relative strength line hit new highs, a bullish sign noted with a blue dot on its weekly IBD MarketSurge chart.
The stock made its first attempt at a breakout Wednesday, when shares rose more than 6% following a bullish analyst report. UBS analyst Karl Keirstead raised his price target for Snowflake to 310 from 285 and reiterated a buy rating.
"The tone from customers about their planned data software and Snowflake spend remains quite strong," the analyst said in a note to clients that followed a pair of company events. Checks with industry sources show that the data management market has consolidated around two winners: privately held Databricks and Snowflake.
In addition, AI is helping drive demand for Snowflake's offering, Keirstead added.
Snowflake is a cloud-based data management firm that provides data analytics software that runs on various cloud-computing platforms. It earns revenue from the computing, storage and data transfer resources consumed on the platform.
Bozeman, Mont.-based Snowflake is the No. 3 stock in the enterprise software group, according to IBD Stock Checkup. It has a three-year EPS growth rate of 53% and three-year sales growth rate of 34%.
The stock has a Composite Rating of 97 and ATR of 3.53%.
