From the Desk of Steve Strazza @Sstrazza
Welcome to The 2 to 100 Club.
As many of you know, something we’ve been working on internally is using various bottom-up tools and scans to complement our top-down approach.
It’s really been working for us!
One way we’re doing this is by identifying the strongest growth stocks as they climb the market-cap ladder from small- to mid- to large- and, ultimately, to mega-cap status (over $200B).
Once they graduate from small-cap to mid-cap status (over $2B), they come on our radar. Likewise, when they surpass the roughly $30B mark, they roll off our list.
But the scan doesn’t just end there.
We only want to look at the strongest growth industries in the market, as that is typically where these potential 50-baggers come from.
Some of the best performers in recent decades – stocks like Priceline, Amazon, Netflix, Salesforce, and myriad others – would have been on this list at some point during their journey to becoming the market behemoths they are today.
When you look at the stocks in our table, you’ll notice we’re only focused on Technology and Growth industry groups such as Software, Semiconductors, Online Retail, Solar, etc.
Then, like any good technician, we filter the list down to those closest to new highs.
This allows the cream of these strong groups to rise to the top and helps streamline our mission to identify technical breakouts in the top-performing stocks.
We made some changes to this scan a while back. Instead of all-time highs, we’re sorting by 52-week highs.
With the severe drawdowns endured by so many growth stocks since last year, all-time highs just aren’t a reality for most of the names on this list right now.
Using 52-week highs will open the door for more stocks and give us more options for finding the best setups.
Here is this week’s list:
*Click to enlarge view
Now let’s dive in and discuss some of our favorite long setups!
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Our first setup today is an $11B company that provides independent investment insights and financial data on its proprietary software platforms. Here is Morningstar $MORN:
Morningstar just made a fresh 52-week high as it looks ready to emerge from an 18-month bearish-to-bullish reversal pattern. Before we get long, we want to see the stock take out this critical 261.8% Fibonacci level with a decisive upside resolution.
On a relative basis, MORN is working its way higher from a bearish-to-bullish reversal pattern versus the broader market. If we see an absolute price breakout, we’d expect the stock to continue outperforming the overall market over longer timeframes.
If it’s above 268, we want to own MORN with a target of 370 over the coming 2-4 months.
Our last setup today is a $16B company that operates a digital sports entertainment and gaming platform. Here is DraftKings $DKNG:
We’ve been bullish DraftKings since the stock resolved higher from a bearish-to-bullish reversal pattern earlier this year. It’s already hit two of our price targets, but we think there is plenty left in the tank for this market leader.
If it’s above the 38.2% Fibonacci retracement level around 34, we’re long and looking for a fresh leg higher.
On a relative basis, the stock is working its way higher out of a two-year bearish-to-bullish reversal pattern versus the broader market. These new relative highs bode well for an upside resolution on absolute terms… And it looks like it’s already underway.
We want to buy or stay long DKNG above 34, with a target of 50 over the coming 2-4 months.
Over longer timeframes, we’re looking for DKNG to rally back to its old all-time highs just north of 70.
That’s the latest scoop on our 2 to 100 Club.
We hope you enjoyed it! Thanks for reading, and please reach out to us with any questions.
Good fishing.
Allstarcharts Team
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