Chipotle Mexican Grill Inc. (NYSE: CMG), Visa Inc. (NYSE: V) and Stryker Corp. (NYSE: SYK) may not, at first glance, seem like they have much in common. However, they’re part of an elite group: All are S&P 500 components that are in buy range after recently breaking out of chart bases.
Chipotle, Visa, and Stryker all broke through overhead price resistance within the past two weeks, but have not yet taken off for the races.
A stock often breaks out of a specific type of chart pattern, but frequently, especially in either volatile or very muted markets, a stock will break out of a consolidation with no particular structure.
Here’s a look at those three stocks, including their breakouts, sales and earnings performance, and their current post-breakout technicals.
Chipotle's Earnings Accelerating
The California-based eatery boasts four quarters of earnings growth acceleration, which has propelled its share price by 23.62% in the past three months and 53.05% year-to-date. Revenue has been growing at double-digit rates in each of the past eight quarters.
A strong track record is often a good indication that more increases are ahead; Wall Street expects net income of $44.41 per share this year, an increase of 35%. Next year that’s expected to grow by another 21% to $53.57 per share.
Chipotle stock is in buy range, having broken out of a flat base with a buy point above $2139.88 on June 30. You can spot that area of sideways trade using MarketBeat’s Chipotle Mexican Grill chart. It rallied to a high of $2147.52 on July 3, then gapped down 0.42% on July 5. Mid-session, shares were trading at $2114.68.
There was no specific news, and selling was in light turnover. It’s likely that a major investor was simply taking some profits after the run-up.
Chipotle has been a leader in its consumer discretionary sector, reflected by the Consumer Discretionary Select Sector SPDR Fund (NYSEARCA: XLY). It’s well-positioned within the sub-industry of restaurants, which have been rallying as consumers continue to spend, challenging some analysts’ views that restaurants would suffer amid high inflation and persistent worries about an imminent recession.
With the stock trading just 1.2% below its buy point after the breakout, Chipotle is still actionable. However, if a selloff continues, be prepared to cut losses.
Visa Trading At 52-Week Highs
Shares of the card issuer rallied to a 52-week high on July 5, as it continues building upon a June 30 breakout. Since February, Visa stock has made rally attempts that repeatedly stalled near the $135 mark; it finally broke through that level with a gap-up of 1.38%. The broader S&P 500 also gapped up that day, as you can see using the SPDR S&P 500 ETF Trust (NYSEARCA: SPY).
Visa’s rally actually began on June 29, when shares leaped 2.79% in above-average, ending the session near the top of their daily trading range. You can see that on the Visa chart, using a candlestick or bar view, which gives you granular detail on a given day’s action.
When a stock rallies and finishes near its session high, rather than pulling back in late trade, that often signals more buying is ahead. That’s exactly what happened, as Visa stock gapped up in the next session.
In fact, the buying continued on July 5, with Visa shares rising 0.55% even as the S&P 500 was down slightly.
Institutional buyers are clearly showing their conviction in the stock. According to MarketBeat’s Visa analyst ratings, the consensus view is “moderate buy.” Since January, 16 analysts boosted their price target on Visa.
Stryker Clears Cup-With-Handle Base
The Michigan-based medical technology and equipment manufacturer broke out of a cup-with-handle pattern on June 28, clearing a buy point above $301.24. Shares rallied to a high of $306.93 on June 30, before pulling back in the next two sessions.
The company’s Mako robotic surgical systems have been making inroads, particularly outside the U.S., where sales began later and have plenty of runway for growth. In the company’s first-quarter report, in May, it touted sales of knee and hip replacement products, as well as the uptake of Mako systems.
Stryker analyst ratings show a consensus of “moderate buy,” with 11 analysts boosting their price targets immediately after the company’s first-quarter report.
The stock is currently in buy range, as it’s fallen only 3.8% below its buy point. Stryker gapped down 0.78% on July 5, as the broader market also retreated.
For now, shares are actionable, but anyone purchasing Stryker stock should be aware of the possibility for a continued pullback. Waiting for the stock to resume its uptrend could be a prudent move for a little extra insurance that it’s still trending higher, and recent selling was simply a reaction to broad-market selling.
Stryker is part of the healthcare sector, which is tracked by the Health Care Select Sector SPDR Fund (NYSEARCA: XLV). Stryker has been outperforming its sector by a wide margin on year-to-date, three-month, and one-month rolling time frames.