Tech stocks GlobalFoundries (GFS), Palo Alto Networks (PANW) and wolfspeed (WOLF) are this week’s top stocks to watch as they build buying points in a challenging market. Pay location (PCTY) and Arista Networks (ANET) round out the list.
PANW shares and PCTY shares are among the IBD Leaderboard watchlist, after strong earnings and guidance. ANET stocks are among the IBD 50 list of top growth stocks. PSTG shares are listed on SwingTrader. GlobalFoundries was the IBD stock of the day on Friday.
More broadly, amid rising interest rates, most of the leading stocks with flashy buy signals are in the solar, anti-pollution or medical space. But these five technology stocks are setting up or moving to set up.
Keep in mind that the market’s uptrend continues to be under pressure, making new purchases a riskier proposition. But now is a good time to build stock watchlists.
All of this week’s top stocks to watch have ascending relative strength lines, at or near highs. That means they outperform the S&P 500, making them solid choices for your investment watchlist.
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GlobalFoundries rose 4% in stock trading from last week, even with a quiet Friday session.
GFS stock remains below a buy point of 66.06 handle of a very deep double bottom base. The pattern started to form on August 12 after GlobalFoundries peaked in revenue after a huge run in July.
The GlobalFoundries handle recently found support at the 200-day moving average. Aggressive investors could use a break from the downtrend in the handle – still close to the 21-day line – as an early entry.
Ideally, the GFS handle would develop into its own good foundation.
In a positive technical sign, the RS line for GFS stocks is poised to hit new highs.
New York-based GlobalFoundries is a chip foundry, meaning it makes semiconductors for error-free chip companies.
GFS shares debuted on the Nasdaq in October 2021, amid fears that a global chip shortage could last through 2023 or beyond. It specializes in the less advanced but essential semiconductors that caused the chip crisis.
GFS stock has an IBD Composite Rating of 91 out of 99. It also has a Relative Strength Rating of 91, meaning it has outperformed 91% of all stocks in the IBD database in the past 12 months.
As a young company with a short history of quarterly earnings, GlobalFoundries earns a mediocre EPS score of 78 out of 99.
But GFS’s earnings per share have risen steadily over the past three quarters, on a sequential basis. Revenue growth varied from 23% to 74% over the same period.
Analysts polled by FactSet expect GlobalFoundries to rise to earnings of $2.61 per share in fiscal 2022, from a loss of 5 cents in 2021.
Shares of Palo Alto Networks gained 3.2% to 565.77 on Friday, rising for a third straight session. PANW shares were up 4.7% for the week.
The cybersecurity stock has formed a cup-with-handle base with a buy point of 578.89. It found support near the 50-day average on Sept. 6, and the subsequent break above the 200-day line (and downtrend in the grip formation) provides an early entry.
PANW shares earn a Comp Rating of 94, RS Rating of 88 and an EPS Rating of 95.
The California-based cyber giant recently reported its third consecutive quarter of accelerating earnings growth. Palo Alto Networks also increased guidance and announced a 3-for-1 stock split.
After the Russian invasion of Ukraine on February 24, Palo Alto said it is monitoring cyberattacks in the region and preparing for any spread beyond it.
Wolfspeed rose 2.6% to 114.21 on Friday. WOLF shares gained 4.9% this week.
Wolfspeed, another semiconductor manufacturer, is consolidating with a buy point of 123.35 after a profit gap on Aug. 18. This move could be seen as a handle in a longer consolidation going back to the end of March or even the end of November.
Undoubtedly, stocks are flashing an early entrance of breaking a handle downtrend.
WOLF shares have an 88 Comp Rating, 96 RS Rating and 59 EPS Rating.
In August, the North Carolina-based chip company released a revenue forecast that exceeded analyst estimates.
Earlier this year, Piper Sandler analyst Harsh Kumar Wolfspeed named a top chip stock for 2022. He expects technology stocks to benefit from the global adoption of electric vehicles, which tend to use far more chips than traditional cars.
Paylocity shares rose 3.4% to 258.45 on Friday, climbing for the fourth day in a row. PCTY shares were up 9.6% this week, rebounding vigorously just above the 10-week moving average.
The move follows three bad weeks in which Paylocity pulled out after a profit gap on August 5.
The recent pullback for PCTY stocks can be seen as a handle in a long consolidation, with a buy point of 276.99. It could become its own base within a week.
Paylocity earns a Comp Rating of 95, RS Rating of 95, and a near-perfect EPS Rating of 98.
Paylocity’s earnings per share grew 39%-74% over the past five quarters. Revenue growth varied between 28% and 37% over the same period.
The workforce management software provider targets businesses with fewer than 50 employees and differentiates itself from rivals through its partnership with 401(k) advisors.
A successful breakout in July 2021 drove PCTY stocks up more than 50%.
Why the market rally is stronger than it appears
Arista Networks added 1.3% to 124.41 on Friday, climbing for the fifth straight session. ANET shares were up 6.1% for the week, which saw it recover from the 10-week moving average and regain both the 200-day and 21-day lines.
ANET stock eyes a 132.97 handle buy point from a double bottom. There is now an early entry into the handle’s downward trend, although it was quite steep. The volume has also been like that for the past few days.
Arista shares, a provider of cloud networking software and hardware, have a perfect 99 Comp Rating, 94 RS Rating and a 96 EPS Rating.
It shows three quarters of accelerating revenue and revenue growth, capped with a 59% EPS gain and a 49% increase in revenue in the last period.
This top tech stock is expected to benefit from data center growth. ANET’s high-end Ethernet switches accelerate communication between racks with computer servers.
For more quality stocks with strong RS lines, check out IBD’s Relative Strength At New High stock 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 own watchlists like the IBD 50 and the IBD Big Cap 20.
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