The market is in its last few weeks of the year, and some investors are already planning their holiday season. While it is true that some market participants have begun to take a break from trading, the market is still full of stocks with established trends. To search for these stocks, we will screen using the 100-day simple moving average.
Moving averages are one of the most used technical indicators by traders and investors who seek to visually gauge the trend of the market. It helps identify whether the market is still ready to buy the stock above a certain periodic price average in a simple glance. If prices are trading above a certain average, then this suggests that investors see that prices are still low and expect them to rise – and vice versa. While some may argue that this may be a self-fulfilling prophecy due to how many traders and investors use it, we cannot deny that it has proven to be helpful for the longest time.
In this article, we’ll look at three stocks trading above their 100-day moving average that we think you should be keeping an eye on.
AppFolio Inc. (APPF)
AppFolio, Inc. is a cloud business management solution aimed at transforming, simplifying and automating critical business operations in the real estate industry. Its solutions are designed to foster the interconnected ecosystem of real estate agents, homeowners, real estate investment managers, rental prospects, and other real estate stakeholders. Its solutions include AppFolio Property Manager Plus, the AppFolio platform and AppFolio Property Manager. The company before integrated AI into its solutions to help property managers improve the experiences of residents under its Sphere-X interface
Should you jump in?
APPF is trading above its previous resistance-turned-support area after hitting a high. Its medium-term bullish trend is intact, as it is trading above an upward-sloping 100-day simple moving average (blue line). Its 14-day RSI is currently consolidating within its bullish zone. Traders and investors who want to jump into the trend can wait for the price to confirm its new support while its 100-day SMA plays a rebound.
Builders FirstSource, Inc. (BLDR)
Builders FirstSource, Inc. is a supplier of new construction and modeling products for the professional markets. The company supplies a variety of structural and related building products, including roof and floor trusses, wall panels, custom millwork and trim, vinyl windows, and engineered wood designed, cut and assembled for every home. BLDR also offers installation services and software solutions for the building products industry. It recently announced its earnings, showing that the company still can beat analysts’ expectations despite the slow housing market.
Contraction or contradiction?
After a three-month correction that began in July, BLDR has now moved above its 100-day moving average. Volatility is also contracting and forming an ascending triangle, which is usually a sign that the price will move its breakout in the coming days. The 14-day RSI formed a trend line after the consolidation of the price. Investors and traders who want to buy into BLDR can expect prices to explode and establish the right direction of the trend.
Adobe Inc. (ADBE)
Adobe Inc. is a software company known for some of the most used software in the industry, such as Adobe Photoshop and Adobe Acrobat. It offers products commonly used in various sectors such as Digital Media, Digital Experience and Publishing and Advertising. The company recently announced its acquisition of the Indian startup Refrate AI, which developed an AI-powered video creation platform. Adobe aims to integrate this into its cloud video editing platform to improve its offerings.
Is a fix imminent?
ADBE just made another high and is showing some price volatility and momentum exhaustion, a sign that we may see a correction soon. Its 14-day RSI also broke its overbought zone after dancing around the 70-point mark several times. This move sometimes signals that a potential retracement is likely to occur soon, and traders may have an opportunity to ride their ongoing trend.
Final Thoughts
I find that trend following is one of the best strategies for making money and building wealth in the market. The important thing to remember is that while the indicator may look great on paper, there is still a certain amount of “reading the tea leaves” required to get the trade going your way. Remember, investing requires target alignment and risk management to ensure you make the most of the trend and get out when it shows signs that it is about to end. Or, as various investors in the space like to say, “The trend is your friend until the end when it bends.”
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At the date of publication, Rick Orford held a position in: ADBE. All information and data in this article is for informational purposes only. For more information, please see Barchart’s Disclosure Policy here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.