MercadoLibre (MELI) has a brand-new flat base, one of several stocks just above or below buy points from this classic bullish pattern.
Fortinet (FTNT), Cadence Design Systems (CDNS), Analog Devices (ADI) and W.W. Grainger (GWW) round out this list of five stocks in flat bases.
Flat bases typically occur after a strong run begins to cool. They can be as short as five weeks and no more than 15% deep. Flat bases signal a stock is resisting a significant retreat.
The stock market rally advanced last week, with the S&P 500 and Nasdaq composite hitting 2023 highs after weeks of sideways market action. But the uptrend remains uneven.
Flat bases typically are rather, well, flat. But FTNT stock is just emerging from a V-shaped flat base. Shares rose 2.7% to 69.63 last week, just topping the 69.17 buy point on Friday. The current buy zone, which stretches 5% beyond the buy point, extends to 72.63.
FTNT stock surged nearly 7% on May, following strong Fortinet earnings. The Sunnyvale, Calif.-based cybersecurity firm’s first-quarter earnings bolted 79% to 34 cents per share, accelerating for a fourth straight quarter. Revenue leapt 32% to $1.26 billion. Both topped views, while Fortinet gave solid guidance.
Fortinet leads the Computer Software Security Group according to the IBD Stock Checkup and is on the IBD 50 list of top growth stocks.
FTNT stock has a perfect 99 Composite Rating, which combines a number of technical indicators into one easy-to-read score. Shares have a 99 EPS Rating as earnings accelerated the past four quarters and averaged 61.5% growth in that time. Its relative strength line is shy of mid-April highs and it has a 92 RS Rating.
FTNT stock has rallied roughly 43% so far this year.
MercadoLibre, another member of the IBD 50 list, is the largest e-commerce company in Central and South America where it rivals industry behemoth Amazon.com (AMZN). It’s also a significant payments player. The Buenos Aires, Argentina-based company operates in 18 countries and generates most of its sales in Argentina, Brazil and Mexico. It averaged 43.25% revenue growth over the past four quarters, leaping 35% to over $3 billion for its most recent period.
MELI stock vaulted nearly 55% so far this year after earnings soared 457% and 205% in its first two quarters, respectively.
After delivering strong first-quarter results on May 3, MercadoLibre initially rallied, but then reversed sharply lower, closing below the 50-day line. But shares reclaimed that key level the next day and have quietly moved back up.
MELI stock rose 2.4% to 1,310.88 last week. Shares finished forming their flat base on Friday with a 1,337.85 buy point.
MELI stock has a perfect 99 Composite Rating and 96 RS Rating.
Cadence Design Systems tops the Computer Software Design group according to the IBD Stock Checkup. CDNS was Thursday’s IBD Stock Of The Day and added to the SwingTrader list of short-term trades.
CDNS vaulted above its 50-day moving average in heavy volume on Thursday after rival chip-design firm Synopsys (SNPS) delivered a beat-and-raise report.
The current buy point is 217.77 as indicated in MarketSmith. On Thursday morning, CDNS stock offered an early entry from the 50-day line.
CDNS stock leapt 7.7% to 216.71 for the week, briefly topping the official buy point on Friday.
Shares pulled back in late April after San Jose, Calif.-based Cadence Design gave weaker-than-expected guidance for the current quarter. However, Cadence Design’s full-year outlook topped views.
CDNS stock has a 98 Composite Rating and 96 EPS Rating. Its relative strength line is off highs and it has a 93 Relative Strength Rating.
Shares bolted nearly 35% higher this year.
Semiconductor manufacturer Analog Devices announces Q2 results early Wednesday. The Wilmington, Mass.-based company’s earnings bolted an average 50.8% over the past four quarters while revenue gains decelerated from 79% growth to 21% growth during that span.
For the upcoming release, analysts polled by FactSet project a 15% EPS gain to $2.75 on an 8% sales rise to $3.2 billion.
ADI stock is about 4% below the 198.35 buy point for its base which is just above its all-time high of 198.25 on April 4. Shares surged above their 50-day line on May 17 after reclaiming their 10-day moving average and 21-day lines on May 15.
ADI stock has a 96 Composite Rating and 94 EPS Rating. Shares climbed 16% year to date.
W.W. Grainger is a major provider and distributor of maintenance, repair and operating products and services for manufacturers and government organizations. It sells over 1.5 million products ranging from light bulbs and HVAC units to office chairs, painting equipment and welding tools. The Chicago-based company also provides various technical support and inventory management services
GWW stock earns the No. 1 rank among its peers in the Machinery-Tools & Related industry group.
Shares swung 23% higher year to date after two straight quarters of more than 30% earnings growth.
GWW stock is trading roughly 4% below its 709.31 buy point, which is just above its all-time-high of 709.21 from early March. The stock reclaimed its key technical lines last week and GWW stock is hovering above its 10-day moving average.
W.W. Grainger’s Composite Rating rose to 95 at the beginning of May and it currently has a 96 EPS Rating.
You can follow Harrison Miller for more stock news and updates on Twitter @IBD_Harrison.
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