Several stock market leaders have emerged after a follow-through day came for both the Nasdaq composite and S&P 500 on April 22. Nearly two months later, more stocks continue to set up and could be on the verge of upside breakouts.
While it's OK to look for stocks breaking out of bases nearly two months into the stock market rally, keep in mind that some may have lagging relative strength lines. If that's the case, the breakout could lack oomph. Always look at stock's relative strength line — the blue line in MarketSurge charts — to help assess the quality of a base.
If you missed some of the early leaders, it's a good idea to keep them on a watchlist and wait for alternate entries. This is generally a better strategy than buying a stock breaking out with a lagging relative strength line.
Watch The Stock Market Leaders
For example, Zscaler has emerged as a big winner in the security software group, while group peer Palo Alto Networks just recently cleared a 195.42 entry. But Palo Alto's relative strength line is still lagging, and it has a middling Relative Strength Rating to boot.
In this case, shunning Palo Alto and watching Zscaler for an alternate entry is sound strategy. After nine straight weekly gains, Zscaler is likely due for a pullback soon. Savvy growth investors will watch for a pullback to the 21-day exponential moving average.
If it bounces with conviction, some traders might decide to start a small position. If Zscaler continues to hold gains and trade tightly near highs, a three-weeks-tight pattern could emerge, or even a flat base.
Note that Spotify has been riding its 21-day line higher after a breakout from a double-bottom base in early May.
This Stock's Relative Strength Is Near Highs
Credo Technology, featured in Thursday's New America and found in the accompanying table of current stock market leaders, is forming a good base with a relative strength line near highs. The fast-growing provider of high-speed connectivity solutions used in data centers is a fundamental powerhouse. That's thanks to two straight quarters of triple-digit earnings and revenue growth.
It's a flawed base after a pullback of more than 50% on the left side of the base. To its credit, though, Credo showed pretty good accumulation as the right side of the base formed.
Hot initial public offering CoreWeave is also featured in the accompanying table. The stock never looked back after a breakout from an IPO base on May 13. It's not buyable now after more than doubling from a 64.62 buy point. But it's another perfect name for your watchlist to see if it starts moving sideways while staying below its June 4 intraday high.
CoreWeave isn't profitable yet but shows huge revenue growth in recent quarters. The company basically rents out cloud access for artificial intelligence development and training.
Meanwhile, after a strong breakout on May 13, Palantir recently reclaimed an alternate entry of 133.49.
Follow Ken Shreve on X @IBD_KShreve for more stock market analysis and insight.
