Microsoft (MSFT), Advanced Micro Devices (AMD), Chipotle Mexican Grill (CMG), Domino’s Pizza (DPZ) and Denbury (DEN) are five stocks to watch this week, as they find key support at their 50-day or 10-week line and set up buy points.
Leading stocks will often retreat to their 50-day or 10-week line after a long run. Rebounds from the first or second pullback after a breakout offer investors a chance to buy or add shares.
Indeed, so far in 2021, buying stocks on pullbacks and other early entries has often produced better gains than traditional breakouts, given the choppy market action and frequent sector rotation.
Microsoft stock dropped 1.75% to 299.897 on Friday, but still rose 1.4% for the week. MarketSmith chart analysis shows MSFT stock bounced from its 10-week line, notching a high of 305.84 intraday on Aug. 20, and has been trading tightly for a few weeks. However, the IBD Leaderboard holding hasn’t technically formed a tight pattern. Still, MSFT stock is buyable now from the 10-week line as it breaks a trend line or after it reaches 305.94.
Microsoft is also a Long-Term Leader stock, so buying it on the pullback can offer a lower-risk entry point.
Microsoft’s relative strength line is at an all-time high and trending upward, a bullish indicator.
The Bellevue, Wash.-based company has posted four straight quarters of accelerating earnings. As a result, its EPS Rating is 94 out of a possible 99.
Meanwhile, its RS Rating is a solid 84. With a top-notch Composite Rating of 99, Microsoft is ranked No. 1 in IBD’s Computer Software-Desktop industry group.
MSFT stock has surged 35% so far this year, bringing its market value to more than $2.2 trillion.
Microsoft, the world’s largest software maker, announced on Sept. 15 its biggest ever stock-repurchase program of as much as $60 billion.
The buyback plan comes as lawmakers mull a 2% tax on buybacks as a way to pay for the proposed $3.5 trillion spending plan that includes an infrastructure overhaul.
Microsoft also increased its quarterly dividend by 6 cents, or 11%, to 62 cents a share.
Santa Clara, Calif.-based AMD makes semiconductor devices used in computer processing as well as graphics processors and other components.
AMD stock has an official buy point of 122.59 from a consolidation. An early entry is possible as it rebounds off its 50-day or 10-week line. But it’s probably best to wait for AMD stock to get over its 21-day line and perhaps break a trend line. AMD stock dropped 2.2% to 103.88 on Friday.
AMD’s relative strength line has been going sideways after retreating somewhat from a peak in early June. AMD’s 99 Composite Rating puts it in the top spot in IBD’s Electronics-Semiconductor Fabless industry group.
Its RS Rating is 85, while its EPS Rating is 99, as it reported several blockbuster quarterly earnings amid soaring demand for chips.
CFO Devinder Kumar said the chip supply crunch that’s hampered production across several industries is improving.
“As we get to 2022 and work with our partners across the board, the supply situation continues to get better,” he said at a Deutsche Bank Technology Conference on Sept. 10. Kumar added that supplying data centers and PC makers are priorities.
AMD’s $35 billion purchase of rival chipmaker Xilinx (XLNX) is expected to close later this year. The deal would expand AMD’s rapidly growing data center business.
Chipotle Mexican Grill, the IBD Stock Of The Day Friday, is up 40% so far this year. After dropping to its 10-week line following many weeks of tight trading, CMG stock is now rebounding from its 10-week line and sits above its 21-day exponential moving average. The stock is buyable at this point. However, a more cautious investor could wait for shares to gain a little more.
The Newport Beach, Calif. restaurant chain known for its burritos, recently expanded its menu to include plant-based chorizo in select markets.
Chipotle’s relative strength line is at all-time highs. Its RS Rating is 87, while its EPS Rating is 94. A stellar 99 Composite Rating places CMG stock at No. 1 in IBD’s retail-restaurants industry group.
Domino’s Pizza Stock
DPZ stock has jumped 55% since the start of the pandemic, as pizza deliveries to homebound folks surged around the globe. The revenue boost has fueled Domino’s expansion plans, chiefly overseas.
The company added 238 net new stores in the last quarter, according to FactSet. Of those, 203 net new stores opened internationally. International retail sales growth spiked 19.5%, supported by 14% same-store sales.
“It was an outstanding quarter of performance for our international business,” said Chief Executive Richard Allison. “I’m particularly pleased with our strong momentum on store growth, as international provides a significant push toward our two- to three-year outlook of 6% to 8% global net unit growth.”
DPZ stock is currently slightly below its 50-day and 10-week lines. A serious break of the 10-week line would be a bearish sign. But Domino’s stock can move above those key benchmarks and break a trend line, that would offer an early entry. The stock has an official flat-base buy point of 548.82.
The restart of the economy’s engines post-pandemic has fueled stock gains among oil and natural gas producers like Denbury. DEN stock has nearly tripled since the beginning of the year.
The firm holds interests in the Gulf Coast and Rocky Mountain regions. It aims to develop significant stranded reserves of American oil from depleted reservoirs through carbon dioxide enhanced oil recovery.
DEN stock is finding support at its 50-day line. A low handle has been forming since Sept. 3 and a possible entry is at 75.30, though not ideal. One could also buy early at 73.41 if the stock moves above a trend line in the handle.
The clearest buy point is 81.47, the high in the cup-type base.
Denbury’s Composite Rating of 99 puts it at the top of its industry group.
Follow Adelia Cellini Linecker on Twitter @IBD_Adelia.
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