As the Nasdaq loses support at its 200-day line of defense after already falling sharply below its 50-day moving average, investors' mindsets have shifted from how to buy stocks to when to sell stocks. But even as risk management takes priority, maintaining a list of stocks to watch is crucial since conditions can change quickly. One way to do that is to check the IBD Breakout Stocks Index.
Updated weekly, the screen currently features names like Meta Platforms (META), Eli Lilly (LLY), GE Aerospace (GE) and T-Mobile (TMUS). Option Care Health (OPCH), Tradeweb Markets (TW) and Paycom Software (PAYC) also make the list. When reviewing these stocks, pay close attention to two telltale signs: the relative strength line and support or resistance around key moving averages.
↑ X NOW PLAYING Out-Discipline The Market: Managing Position Size And Watching Market TrendsSee Who Joins Meta Stock And Eli Lilly On The IBD Breakout Stocks Index
In a clear call for caution, Investor's Business Daily's recommended market exposure level has dropped to the lowest-possible 0%-20%. Amid such weakness, use the relative strength line to gauge an individual stock's relative performance. A rising relative strength line shows a stock is outperforming the S&P 500, while a downtrending line shows the reverse.
Use Meta, GE Aerospace, T-Mobile, Option Care Health and Eli Lilly as examples.
Prior to the sharp downturn on the Nasdaq, Meta Platforms notched a record high with its RS line rising sharply. As Meta stock gets dragged down by the market turmoil, its relative strength line has also retreated.
Meanwhile, the relative strength lines for T-Mobile, Eli Lilly and Option Care Health continue to rise. While the RS line for GE stock had dipped, it remains near its 52-week high.
In addition to the relative strength line, also monitor a stock's action around key moving averages such as the 21-day exponential and 50-day lines.
After initially holding support at its 50-day moving average as the market sold off, Meta Platforms fell below that benchmark on Tuesday. Further highlighting the turmoil in Big Tech, the Facebook and Instagram parent now joins all of the Magnificent Seven stocks below that moving average.
Atlassian — featured in the IBD Stock Analysis on Feb. 28 — is clinging to support at its 50-day line, closing just slightly below it Tuesday. Atlassian and Meta will need to recover some before being worthy of a watchlist.
The action in travel industry peers Expedia (EXPE) and Booking (BKNG) also brings the 50-day moving average into focus. Expedia managed to bounce off that line on Tuesday, while Booking closed right around it.
Building on its February breakout, T-Mobile has climbed beyond buy range. It pulled back Tuesday, but closed the session around 12% above its 50-day line.
Option Care Health is also showing market-bucking strength, trading 18% above its 50-day benchmark.
Eli Lilly continues to show strength as it works on a first-stage base, standing 11% above its 50-day line.
The IBD Breakout Opportunities ETF (BOUT) from Innovator Capital Management tracks the IBD Breakout Stocks Index. As with other index ETFs, this fund allows you to invest in the entire index in addition to, or rather than, buying individual stocks. Learn more here about the ETF and Innovator.
Follow Matthew Galgani on X (formerly Twitter) at @IBD_MGalgani.
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