Investors should be looking for leading stocks breaking out of bullish bases in volume, with their relative strength lines - which track stocks' performance vs. the S&P 500 index - leading or confirming the breakout.
Weibo ( WB ), Atlassian ( TEAM ), Match Group ( MTCH ) and Align Technology ( ALGN ) cleared buy points in proper bases Tuesday morning with RS lines that were already right at or close to at least short-term highs. But the stocks pulled back or turned negative with the broader market reversal. Only Weibo is in buy range now.
[ibd-display-video id=3086276 width=50 float=left autostart=true] Take-Two Software Interactive ( TTWO ) also is near a buy point in a proper base with strong RS lines, though it also reversed lower.
Weibo and Align Technology have best-possible 99 Composite Ratings, while Atlassian has a 98 Composite Rating . Match Group and Take-Two Interactive are at a solid 92.
In recent weeks, many stocks have been hit buy points in lackluster volume with RS lines signaling the stock is just keeping pace with or falling behind the fast-rising S&P 500. Some of those breakouts have not fared well.
Weibo, a top Chinese short-message social network, cleared a cup-with-handle base with a buy point of 122.31. Shares rose 1.4% to 123.19 in heavy volume on the stock market today after spiking to 128.37 intraday.
Closing near session lows is not great action, but that's better than the general market, which reversed from strong gains to close lower, near the day's worst levels.
Weibo's RS line edged past a short-term peak around the handle and neared the old all-time high on the left side of the consolidation. (The RS line is the blue line in the stock charts below.)
Keep in mind that Weibo broke out of a late-stage base, which are less likely to succeed or be big winners than a first- or second-stage pattern.
Weibo parent Sina (SINA) has been flirting with a double-bottom base buy point of 113.05, briefly crossing that level Friday. Sina fell 0.9% to 111.97 after climbing to 116.11 intraday. Its RS line is lagging more than Weibo's. Sina's RS line was trading right at very short-term highs.
Atlassian, a collaboration software maker, is in a cup base with a 53.55 buy point, shot up to 55.25 intraday but pulled back to close with a 0.5% gain at 52.82.
The RS line has moved above the short-term high around a pseudo-handle, providing some confirmation of the stock price action. The RS line is still lagging its November highs.
Atlassian reports earnings on Thursday.
IBD'S TAKE:With the market now in a confirmed rally for 100 days , it can be hard to see who are the true leading stocks and which are in the middle of the pack. See why IBD's relative strength line is so important .
Match Group, which operates Match.com, Tinder and other dating sites and apps, is in a consolidation with a 32.97 buy point. That's 10 cents off the old intraday high on Nov. 8 following earnings, but the stock closed well below that peak that day. So as Match Group has consolidated and moved toward its old highs, the RS line has actually moved into new-high ground, bullish and uncommon for base-building stocks in the current market uptrend.
Match.com briefly topped the buy point on Jan. 3 but closed lower. Shares ended Friday at 32.64.
Match Group rose to 33.08 intraday but reversed to fall 3.8% at 31.40.
Take-Two Interactive Software
Take-Two Interactive Software fell 2.85% to 113.96 intraday Tuesday, finding some support just above its 50-day line. As a result of Tuesday's action, the video game stock now has a handle for its consolidation, slightly lowering the potential buy point to 120.28.
Take Two's RS line took a hit with Tuesday's sell-off. However, if the stock can break out strongly, the RS line could retake its short-term high around the handle.
Align Technology, which makes the Invisalign transparent braces, tumbled from late November to just before Christmas. Shares have rebounded since then, building the right side of a consolidation with a 266.51 entry. Align rose 2.1% to 263.88 after reaching 268 intraday, briefly clearing that entry point.
Align's RS line is moving higher, though still off its late November peak. It has risen above a very-short-term high. It also helps that the RS line had such outperformance in 2017, as Align was one of the big stock winners of the year.
YOU MIGHT ALSO BE INTERESTED IN: