They say every dog has its day.
For U.S. large cap stocks, that day has finally arrived for some of the year’s biggest underperformers.
The Russell 1000’s 11% rebound from last month’s low has given some much-needed relief for a market struggling with a volatile concoction of war, inflation, and slowing economic growth. Among the biggest gainers in recent weeks have been names hardest hit by the correction. This has left investors wondering—is it safe to tiptoe back into 2022’s biggest laggards?
Although the CBOE Market Volatility Index has reached a point of slumber, volatility could flare up at any moment given the myriad of unresolved macroeconomic and geopolitical issues. However, just because the fear gauge is low doesn’t mean investors should fear a reversal.
A good way to find stocks with a good chance of riding the recent momentum is to look for bullish chart formations. Such patterns often signal strong uptrends that can withstand near-term turbulence. The charts suggest these bruised large caps are getting off the mat.
Is Dynatrace Stock in an Uptrend?
The bottom may finally be in for slumping software company Dynatrace, Inc. (NYSE:DT). Since the stock slipped to a new 52-week low under $40 on March 15th, the technical picture has become much brighter. That’s because not one but two bullish chart patterns have emerged.
With the stock climbing back to around $47, a megaphone bottom was confirmed. The intermediate term pattern is characterized by a decisive uptrend that follows a period of erratic trading. This megaphone announced that Dynatrace could continue trending higher and reach the mid-$50’s by the end of next month.
At the same time, the chart is flashing a double bottom which solidifies the notion that Dynatrace has reached a floor. This came about when the stock failed to breach a key support level and instead reversed higher. The pattern also points to a retracement to the mid-$50’s in the coming weeks.
Will Meta Platforms Stock Continue to Recover?
Meta Platforms, Inc. (NASDAQ: FB) appears to have a platform from which to fill its steep early-February gap down. After sliding below $200 for the first time in two years, the former Facebook has climbed 10% alongside the broader market rally—and has a bullish chart pattern that could keep it trending higher.
A double bottom has been established on the daily chart creating a foundation that Meta Platforms looks unlikely to breakthrough. The reversal is developing rather quickly and could be bringing with it another $20 upside to the low $240’s.
Also in the stock’s favor is a bullish relative strength indicator (RSI) crossover on the weekly chart. This coincided with the double bottom as did a bullish outside bar and engulfing line that back the potential for a sustainable reversal. March 18th was a big day for Meta Platforms’ technicals. It could be looked back upon as the day the long road back to the $300’s began.
What Do The Technicals Say About Domino’s Pizza Stock?
Domino’s Pizza, Inc. (NYSE: DPZ) is also trying to make its way back to record price levels after dipping under $400. Still down 29% year-to-date, the pizza chain operator has a lot of ground to make up—but, boosted by a pair of bullish chart formations, is starting to deliver.
Over the past month, two separate continuation wedges have been sliced into Domino’s daily chart. The first took shape in late February. If it holds true to form, a sharp reversal could unfold and spring the stock to fresh record highs before Memorial Day. More recently, another continuation wedge was created that could also sync up with the October to December 2021 uptrend. The continuation wedge pattern tells us that a stock’s prior uptrend has been interrupted but may be resuming due to a bullish reversal.
These would be major moves over a short period but we’ve seen Domino’s go on a couple nice runs over the past year. They have been sparked by strong earnings reports that have reflected consumers’ hearty appetite for online ordering and delivery. If Domino’s can once again exceed consensus expectations when it reports first quarter results next month, the current uptrend could accelerate.
Some on the Street believe the road back to the $500 level is clear. Earlier this month Bank of America, BTIG, Evercore ISI, and Oppenheimer gave Domino’s price targets north of $500 to go along with their buy ratings. Barclays, on the other hand, gave the company its lone sell rating and a $410 target. The rest of the Street is mostly cautious on Domino’s awaiting to see if it can navigate rising ingredient and wage costs and deliver similarly strong growth in 2022.
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