Datadog stock, Netflix (NFLX), Nasdaq (NDAQ), Horizon Therapeutics (HZNP) and Palo Alto Networks (PANW) are five top stocks to watch this week, with most near buy points while the market overall continues to struggle.
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A highly rated software stock, Datadog (DDOG) earns a spot on the IBD 50 list of top growth stocks.
All five stocks have rising relative strength lines. Most of their RS lines are at or near highs. The exception is Netflix, whose RS line is rising bullishly but well below highs.
With the market in correction, investors should focus on stocks with high RS lines. A rising RS line means that a stock is outperforming the S&P 500 index. It is the blue line in the charts shown.
Overall, it may be a good time to add stocks to watchlists. Any buys should be small, with overall exposure light, given uncertain market conditions.
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Stock Market Rally: Watch The RS Line
The relative strength line is a quick way to spot winners in any market — up or down.
The Relative Strength At New High stocks list is a great place to look for quality names with strong RS lines. IBD’s stock research platform MarketSmith has a screening tool that identifies stocks with RS lines making new highs.
In addition, the best growth stocks have an IBD Composite Rating of 90 or better, out of a best-possible 99.
All the stocks to watch this week meet that bar. Netflix leads with a superior Composite Rating of 97. It’s followed by Palo Alto Networks with a 95, Horizon stock with a 94, Datadog with a 93, and Nasdaq with a 92. The Composite Rating combines five separate proprietary IBD ratings, based on key fundamental and technical criteria, into one easy-to-use score.
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Datadog Stock
After Datadog earnings crushed views in early August, the provider of software tools for cloud monitoring and security surged to record highs. It’s in range from support off the 50-day line, offering a buy point around 135.45, according to MarketSmith chart analysis. The 10% buy range falls just a penny short of 149.
Datadog’s rebound has hoisted shares above the 10-day moving average and also above the 21-day line. The RS line has rallied since early May to highs.
New York City-based Datadog earns a solid IBD Relative Strength Rating of 92. That means it has outperformed 92% of all stocks over the past 12 months. However, DDOG shows a lackluster EPS Rating of 44 out of a best-possible 99.
On an adjusted per-share basis, Datadog turned a profit for the first time in 2020 as sales leapt 66%. In all of 2021, Wall Street expects Datadog earnings to grow 26% as sales rise 56%, according to FactSet.
Nasdaq Stock
NDAQ stock also provides an entry from a bounce off the 10-week line. A move above 197.33, marking Thursday’s high, would get the stock above a short trend line while still being close to the 50-day/10-week lines. After next week, Nasdaq stock could have a…
Read More: Datadog, Netflix Lead Five Stocks Standing Tall In Market Correction