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3 Stocks Trade In Buy Zones While RS Lines Hit Highs

Today’s IBD Screen Of The Day focuses on growth stocks with rising RS lines hitting new highs, and those include a few breaking out past a new buy point.




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Insurance broker Marsh & McLennan (MMC), Nasdaq (NDAQ) and LKQ (LKQ) are featured on the list. Marsh & McLennan is trying to break out, while Nasdaq and LKQ are trading inside buy zones after breakouts last week.

Analyzing Marsh & McLennan

Marsh & McLennan, an insurance broker based in New York City, topped a flat base with a 162.36 entry on Friday but failed to stay inside the buy range. Shares regained the buy point in afternoon trading Monday, but the breakout remained tentative. The base formed almost entirely above the 50-day line, according to MarketSmith analysis,

Most important, the RS line reached a new high on the move to new highs, which signals relative strength in the stock’s performance compared with the S&P 500. Shares gained a mild 0.3% on Monday afternoon.

The company offers risk and insurance services for clients in over 130 countries. Marsh & McLennan is expected to announce Q3 earnings on Thursday before the market opens. Earnings could be a catalyst for a move higher in the stock, but could also hinder the recent breakout if EPS and sales fail to meet expectations.

In the three most recent quarters, both year-over-year earnings and sales growth have accelerated. EPS growth went from 0% to 21% and 33% while sales rose 4%, 9% and 20%.

Ideally for top growth stocks, investors will see year-over-year growth of 25%, and Marsh & McLennan falls a little shy of that. Still, the recent acceleration in growth is a positive sign. For Q3, analysts expect the firm to report earnings per share of $1 on sales of $4.4 billion, according to IBD data.

Nasdaq Trades In Buy Zone

Nasdaq, the company that operates the stock exchange with the same name, is also among stocks with RS lines hitting new highs. The stock built a five-week flat base with a 199.99 buy point. Shares broke out last Monday. The stock also held above its 50-day moving average as it formed the current base.

Nasdaq’s RS line has been coasting higher in recent weeks while the stock maintains a decent RS Rating of 87. The stock holds a solid 90 IBD Composite Rating. But Nasdaq also has earnings on deck, a cause for caution. According to the company’s investor relations page, Nasdaq is set to report earnings Wednesday before the market opens.

Analysts expect the firm to show EPS of $1.71 on sales of $833 million. Nasdaq has averaged year-over-year top-line growth of 20% over the past three quarters. Nasdaq’s EPS averaged growth of 26% over that same period.

Growth Stocks: LKQ Corp

LKQ, the next featured stock on this list, has had a strong 2021. Shares have risen 57% year to date. The growth stock consolidated to build a flat base with a 53.27 entry.

LKQ broke out from the flat-base entry on Wednesday. Shares remain near the upper edge of the buy zone, which tops out at 55.93. Like the other stocks on this list, LKQ’s RS line reached a new high, which is a positive sign as shares break out.

The firm, which is based in Chicago, distributes aftermarket replacement auto parts to collision repair shops throughout the U.S. The firm’s top line grew 113% year over year in the most recent quarter. Sales grew 31%.

Follow Fox on Twitter at @rachelgfox for more analysis other growth stocks.


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