U.S. Steel (X), Lowe’s (LOW) and Wayfair (W), Southern Copper (SCCO), and Kulicke & Soffa (KLIC) are five stocks to watch this week as they set up buying opportunities.
In the current split market rally, investors should be cautious about adding new stocks, especially techs, to their portfolios. But they can have some exposure. And it’s always a good time to build up watchlists.
On this week’s list, high chip demand in the automotive and other industries is fueling chip gear make Kulicke & Soffa. Commodities-based stocks like U.S. Steel and Southern Copper are also gaining momentum, thanks to an economic recovery that’s pushing up demand and prices. Meanwhile, the remodeling boom continues to boost retail stocks like home improvement giant Lowe’s and online furnishings retailer Wayfair.
Wayfair stock was Friday’s IBD Stock Of The Day.
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Kulicke & Soffa provides equipment used in the manufacture of semiconductors. It doesn’t make chips, but it makes the packaging equipment that connects semiconductors to their protective casings.
New kinds of applications like 5G chipsets require more complicated and advanced packaging, which spurs more demand for KLIC’s products. As a result, KLIC’s earnings and revenue have skyrocketed in the last year.
KLIC stock raced past a buy point of 39.78 from an ascending base on Feb. 4, according to MarketSmith chart analysis. It’s now in a five-week consolidation. It needs another week to be a proper base, but it’s showing a buy point of 52.65.
KLIC stock fell 1.45% on Friday to 48.90, but rose 4.9% for the week.
It’s possible that KLIC stock will forge a handle, offering a lower entry. A trend line from the 52.55 top could provide an even-earlier entry.
KLIC’s relative strength line is trending upward. The RS line, the blue line in the charts provided, tracks a stock’s performance vs. the S&P 500 index.
The stock has an RS Rating of 87. The RS Rating tracks a stock’s performance vs. all stocks over the past 12 months, with emphasis on the past three months. Its EPS Rating is 82. With a top-notch Composite Rating of 99, KLIC is ranked No. 1 in the IBD Electronics-Semiconductor Equipment industry group.
Applied Materials (AMAT), MKS Instruments (MKSI) and Brooks Automation (BRKS) are other chip-equipment makers near buy points.
U.S. Steel Stock
Pittsburgh-based U.S. Steel is a maker of flat-rolled, tubular and sheet steel with operations in the U.S. and central Europe.
At the start of the pandemic last year, steel mills were shut down to stop the spread of the virus among workers. Also, end-users in various industries closed too, slashing demand for steel.
Now steel prices have soared as demand outpaces supply while steel producers race to get back online. Trump-era tariffs, which President Biden is keeping for now, and hopes for an infrastructure bill also are keeping steel prices high.
U.S. Steel stock climbed from a low of around 5 in March 2020 to a high of 24.71 in January. Shares are closing in on a buy point of 24.81 from a cup base, though they fell 7.3% to 22.41 last week. The stock’s weekly chart shows a 24.56 handle entry. The daily chart is on track to have a proper handle with that 24.56 buy point after Monday’s close.
X stock has an RS Rating of 93 out of a possible 99. Its relative strength line is trending higher.
Several other steel stocks have already broken out, including ArcelorMittal (MT).
Southern Copper Stock
Phoenix-based Southern Copper is an integrated copper producer with mining and refining facilities in Peru and Mexico. It also produces byproducts such as zinc, silver and other metals.
SCCO stock is trying to find support at the 10-week line once again. A rebound from that level could offer a buying opportunity. Investors might want to wait for Southern Copper stock to clear a trend from the Feb. 22 peak of 83.15. Shares are working on a consolidation that could offer an 83.25 buy point soon.
SCCO stock’s RS line has been going sideways after rising to a two-year high in the last few months. Its RS Rating is a solid 83. Southern Copper has an EPS Rating of 93, after it reported two straight quarters of accelerating earnings and revenue.
Management said after announcing earnings that it was hopeful that growth in consumption in China and other economies will drive demand for copper through 2021.
The building and renovation trend is still going strong, even as the economy reopens and people have more options to spend their money elsewhere.
LOW stock tripled from a low of 60 intraday on March 19, 2020, to the Oct. 16 peak of 180.67. It hit a recent high of 179.46 on Feb. 9.
On Friday, Lowe’s stock rose 2.6% to 179.49, capping a 4.55% weekly gain. Intraday, LOW stock hit 180.55, briefly breaking past a short consolidation before closing just below the 179.56 entry. There’s an old three-weeks-tight pattern, also with a 179.56 entry. The short consolidation, following a failed breakout, is part of the five-month consolidation with a 180.77 entry.
Lowe’s stock raced higher over the past two weeks, so a pullback is quite plausible here. Ideally, Lowe’s stock would pull back gently.
Lowe’s has an RS Rating of 63 and an EPS Rating of 93. The Mooresville, S.C.-based home-improvement retailer has posted double-digit profit growth for the last five quarters. LOW stock’s relative strength line has risen for the past two weeks but after trending lower from late October.
Fueled by consumer spending on home furnishings during stay-at-home orders, Wayfair finished 2020 strong, notching its first year of profitability. It had 2020 EPS of $5.04, swinging from a 2019 loss of $8.03. The Boston-based company had $14.1 billion in 2020 sales, up 55%.
While a slowdown is expected as people start spending less on the home and more on travel and entertainment, industry watchers say Wayfair stands to benefit from its recent customer growth. The number of active customers reached 31.2 million in Q4, an increase of nearly 54% year over year.
W stock hit a 52-week high intraday on Jan. 14 but pulled back from that high, finding support at its 50-day moving average.
On Friday, Wayfair stock rose 2.9% to 335.36. Intraday, shares hit 348, clearing a 343.09 handle buy point.
Wayfair stock’s RS line is trending upward again and near consolidation highs, though not all-time highs. W stock has an RS Rating of 98 and an EPS Rating of 74.
Meanwhile, upscale home furnishings and housewares retailer Williams-Sonoma (WSM) surged 29% last week, gapping out of a base on strong earnings and guidance. Upscale furniture retailer RH (RH) reports quarterly results on Wednesday. RH stock cleared a trend line on Friday, near an official buy point. Except for the earnings report, RH would be actionable.
Follow Adelia Cellini Linecker on Twitter @IBD_Adelia.
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