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5 quality stocks getting ready to break out

By Kristoff De Turck - reviewed by Aldwin Keppens

~ 4 minutes read - Last update: Aug 28, 2023

The concept of quality investing is nothing new but the interpretation of what exactly constitutes quality stocks is quite subjective and highly dependent on the person investing in them.

At ChartMill we apply some very specific criteria which you can find in this trading idea.

In summary, we are mainly interested in stocks of companies that have shown strong organic sales growth for some time and whose earnings and free cash flow are growing annually. Essential to the concept of quality investing is a high return on invested capital and a manageable debt position.

In this blog post, we have selected 5 stocks that meet the above-mentioned quantitative characteristics and, in addition, may also be interesting candidates from a technical point of view because they are quoted close to existing resistance and are on the verge of a breakout.

Mastercard

Profile

Ticker: MA (NYSE)

Sector: Financials

Industry: Financial Services

Mastercard, Inc. is a technology company, which engages in the payments industry that connects consumers, financial institutions, merchants, governments, and business. The company is headquartered in Purchase, New York and currently employs 29,900 full-time employees.

Fundamentals

Mastercard fundamental profitability Mastercard fundamental health

Charts

Mastercard technical daily Mastercard technical weekly

Trend (using our ChartMill Trend Indicator)

Short term trend: bullish

Long term trend: bullish

Technical Analysis

The current resistance is between $400 and $405, a price level that has been intact since late April 2021 and has been tested several times.

The Mansfield relative strength on the weekly chart has recently turned positive again and the latest weekly candle is bullish with a weekly close that was 2.7% higher.

A close above $405 means a new all time high, which could be an important trigger for further price appreciation with strong momentum.

Regeneron

Profile

Ticker: REGN (NASDAQ)

Sector: Healthcare

Industry: Biotechnology

Regeneron Pharmaceuticals, Inc. is a biotechnology company, which engages in the discovery, invention, development, manufacture, and commercialization of medicines. The company is headquartered in Tarrytown, New York and currently employs 11,851 full-time employees.

Fundamentals

Regeneron fundamental profitability Regeneron fundamental health

Charts

Regeneron technical daily Regeneron technical weekly

Trend

Short term trend: bullish

Long term trend: bullish

Technical Analysis

Regeneron has been going through a very strong period with an exceptional price increase. In less than a month, the price rose from $730 to $830, an increase of almost 14%!

Therefore, the recent breakout above $840 was not too long-lived. It seems that the price needs to catch its breath first. The distance between the price and the rising chartmill trend indicator shows well the scorching pace at which the recent price rise occurred. Currently the price is quoted at the previous breakout level.

It is possible that buyers will re-enter the market at that level. However, from a technical perspective, it would be better if the momentum cooled a bit more to the $800/$810 price level.

Automatic Data Processing

Profile

Ticker: ADP (NASDAQ)

Sector: Industrials

Industry: Professional Services

Automatic Data Processing, Inc. engages in the provision of business outsourcing solutions specializing in cloud-based human capital management. The company is headquartered in Roseland, New Jersey and currently employs 63,000 full-time employees.

Fundamentals

Adp fundamental profitability Adp fundamental health

Charts

ADP technical daily ADP technical weekly

Trend

Short term trend: bullish

Long term trend: bullish

Technical Analysis

After a strong run up in the month of July where the price rose to $256, August was mostly consolidation. The price moved sideways with relatively low volume while a symmetrical triangle pattern formed.

Meanwhile, the Mansfield RS indicator rebounded above zero for the first time since early 2023.

A breakout above $256 opens the way to the $270 price level, the main resistance on the weekly chart.

Broadridge Financial Solutions

Profile

Ticker: BR (NYSE)

Sector: Information Technology

Industry: IT Services

Broadridge Financial Solutions, Inc. engages in the provision of investor communications and technology solutions to banks, broker-dealers, mutual funds, and corporate issuers. The company is headquartered in Lake Success, New York and currently employs 14,700 full-time employees.

Fundamentals

BR fundamental profitability BR fundamental health

Charts

BR technical daily BR technical weekly

Trend

Short term trend: bullish

Long term trend: bullish

Technical Analysis

The stock has been trapped in a sideways range between $178 and $184 since August 10. The price is currently at the upper end of this range and volume has increased somewhat over the past two weeks.

Most noticeable is the strength of the current long-term resistance. On the weekly chart, it is currently the fourth time that the $185 price level has been tested.

A break above $185.4 would mean a new all time high for this stock which will undoubtedly lure more buyers.

Murphy USA

Profile

Ticker: MUSA (NYSE)

Sector: Consumer Discretionary

Industry: Specialty Retail

Murphy USA, Inc. engages in marketing motor fuel products and convenience merchandise through retail stores, namely Murphy USA and Murphy Express. The company is headquartered in El Dorado, Arkansas and currently employs 6,000 full-time employees.

Fundamentals

MUSA fundamental profitability MUSA fundamental health

Charts

MUSA technical daily MUSA technical weekly

Trend

Short term trend: bullish

Long term trend: bullish

Technical Analysis

The stock experienced a sharp dip between mid-July and early August but has since recovered very well, allowing the price to once again lean against existing resistance at the $320 to $323 level.

A cup-and-handle pattern is currently visible on the daily chart.

With the 'mansfield rs' indicator just turned positive again, this is a stock to keep an eye on as soon as the price can break through above $323.5.

In that case, again, there is the advantage that with such a breakout, the price enters unexplored price territory.

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REGENERON PHARMACEUTICALS

NASDAQ:REGN (7/10/2024, 7:24:15 PM)

After market: 1071.12 0 (0%)

1071.12

+17.09 (+1.62%)

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