Skip to main content

3 Stocks Approaching Possible Breakout Points

Friday, April 23, 2021 | Kate Stalter
3 Stocks Approaching Possible Breakout Points Align Technology (NASDAQ: ALGN), HubSpot (NYSE: HUBS) and Trex (NYSE: TREX) are setting up in healthy areas of price consolidation, which may set the stage for fresh run-ups.

One proven strategy for grabbing a stock at the beginning of a run-up is by tracking its base. It’s frustrating for investors to see a stock pull back, but these patterns form when institutional investors sell shares, usually to take profits after a rally.

This year, you’ll likely see some profit-taking driven by capital-gains taxes. The marketwide rally in 2020 began in March, and gained steam as the year went along. Many investors like to wait until their holding is a year old before selling. At that point, they would pay long-term capital gains taxes, which are more advantageous than short-term capital gains taxes. 

Whatever the reason for the selling, a base gives a stock a chance to pause its run-up before continuing its rally. 

Align, whose flagship product is Invisalign, a clear dental alignment system, began shaping its current cup formation in February, around the same time as growth stocks, as an asset class, began retreating. 

Although the company was profitable in 2020, it, like so many others, saw sales and earnings decline in the first half of the year. That changed in the second half of the year, as revenue and earnings growth resumed.

The cup-shaped base corrected 21% from peak to trough, at least so far. There was some heavy-volume selling during the initial weeks, but that stabilized, and volume has been muted recently, which shows the big selling could be in the rear view mirror. 

Often, a catalyst for breaking out of a base is a better-than-expected earnings report, or at least a report that brings some kind of optimistic news. Align reports its first quarter on April 28, with Wall Street expecting earrings of $1.73 per share on revenue of $816.94 million. The company topped estimates in three of the past five quarters. 

If the stock does break out soon, watch for heavy volume as it clears resistance at $634.46. It’s currently trading at around $613. Alternatively, it may form a handle if it pulls back further. 
3 Stocks Approaching Possible Breakout Points

HubSpot, which makes a cloud-based customer relationship management system, is etching a cup-with-handle formation. This correction, like Align's, began in mid-February. 

The company reports earnings on May 5. Wall Street expects a loss of $0.38 per share on revenue of $242.86 million. Hubspot has a history of beating estimates, so that’s something for investors to watch for. 

The stock has fundamental strength, which is a box to check when you’re looking at bases close to a breakout. Revenue growth accelerated in the past two quarters. Hubspot managed to grow revenue in the first half of 2020, helped by a slew of companies pivoting to derive more of their revenue online. 

In the current base, the top of the handle is $544.83, which is the price you want to see the stock surpass, preferably in heavy turnover. Trading volume during the handle area has been tepid, indicating just a mild round of selling, not a vast shakeout. 

The stock is now trading near $533. 
3 Stocks Approaching Possible Breakout Points

Another stock potentially nearing a breakout is Trex, which hails from the red-hot building and remodeling industry. The company makes engineered composite decking materials that won’t rot, stain, become termite food or require painting. 

The stock is currently forming a somewhat shapeless consolidation, although it may possibly evolve into a cup with handle. An upcoming news catalyst for a breakout may be its May 10 earnings report. Wall Street is eyeing net income of $0.38 per share and revenue of $241.16 million.

Revenue growth accelerated from 7% to 39% in the past two quarters, always a sign of strong demand. Annual revenue also grew between 2018 and 2020. 

One potential warning sign about its current base: It’s the fourth time the stock has pulled into a base in the past year. A fourth-stage base often indicates the run-up is getting long in the tooth, and the stock may need to undercut a previous structure low to fully flush out weak holders or those grabbing profits.
3 Stocks Approaching Possible Breakout Points

Featured Article: Stop Order Uses For Individual Investors


7 Stocks That Cathie Wood is Buying And You Should Too

If you’re an investor that likes to go with the “hot hand,” then they don’t get much hotter than Cathie Wood. The founder and CEO of ARK Investment Management delivered returns of over 100% in all five of her firm’s exchange-traded funds (ETFs) in 2020.

The names of her funds showcase some of the hottest emerging growth trends in the market: financial technology (fintech), genomic revolution, innovation, autonomous technology/robotics, and next generation internet.

As you would expect, these funds contain some of the hottest growth stocks from the past year. And in the aftermath of the tech selloff, Wood is not backing away. In fact, she’s doubling down on her strategy. It might not be exactly a matter of being greedy while others are fearful; perhaps more like being prepared while others are distracted.

But the other thing about Wood’s selections is that many of them are not obscure names. These are companies that were among the hottest names in 2020. Wood simply believes that they still have room to run. And that’s one reason you should consider making them a part of your portfolio.

In this special presentation, we’re giving you just seven of the stocks that Cathie Wood is buying or has bought recently. We’ve attempted to pick out at least one stock from each of the ARK ETFs. As with any investment decision, it’s important that you perform your own research before making a decision.

View the "7 Stocks That Cathie Wood is Buying And You Should Too".


Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
Align Technology (ALGN)2.1$559.52-1.7%N/A25.46Buy$627.09
HubSpot (HUBS)1.5$482.91-3.0%N/A-266.80Buy$525.92
Trex (TREX)1.6$101.78-2.8%N/A70.44Hold$95.88
Compare These Stocks  Add These Stocks to My Watchlist 

MarketBeat - Stock Market News and Research Tools logo

MarketBeat empowers individual investors to make better trading decisions by providing real-time financial data and objective market analysis. Whether you’re looking for analyst ratings, corporate buybacks, dividends, earnings, economic reports, financials, insider trades, IPOs, SEC filings or stock splits, MarketBeat has the objective information you need to analyze any stock. Learn more about MarketBeat.

MarketBeat is accredited by the Better Business Bureau

© American Consumer News, LLC dba MarketBeat® 2010-2021. All rights reserved.
326 E 8th St #105, Sioux Falls, SD 57103 | U.S. Based Support Team at [email protected] | (844) 978-6257
MarketBeat does not provide personalized financial advice and does not issue recommendations or offers to buy stock or sell any security.

Our Accessibility Statement | Terms of Service | Do Not Sell My Information

© 2021 Market data provided is at least 10-minutes delayed and hosted by Barchart Solutions. Information is provided 'as-is' and solely for informational purposes, not for trading purposes or advice, and is delayed. To see all exchange delays and terms of use please see disclaimer. Fundamental company data provided by Zacks Investment Research. As a bonus to opt-ing into our email newsletters, you will also get a free subscription to the Liberty Through Wealth e-newsletter. You can opt out at any time.