The stock market has staged an incredible rally over the last three weeks. One couldn’t help but be flabbergasted by the surge; however, it is time for investors to exercise caution. While I remain optimistic about the market’s performance by year end, I believe the current scenario calls for prudent profit-taking.
I want to clarify that I am not anticipating any cataclysmic event. Nonetheless, when the Nasdaq 100 has surged by 13% in just a few weeks, I am not inclined to make aggressive long positions. In my opinion, a pullback to the breakout levels is a reasonable expectation over the next couple of weeks, setting the stage for a year-end rally.
Here, I intend to outline two stocks worth buying in the event of a market pullback. This is a more calculated approach to the market, so investors not actively trading should feel comfortable maintaining long exposure through the end of the year.
Image Source: TradingView
Copart
Copart CPRT, a dominant player in the car auction industry, has been an outstanding stock to own all year. It has recently broken out from a clear bullish consolidation and would be an excellent choice to buy on a pullback.
Image Source: TradingView
Copart holds a Zacks Rank #2 (Buy) rating, indicating upward-trending earnings revisions. Current quarter earnings estimates have been revised higher by 3.2% over the last two months and are forecast to climb 23% YoY to $0.32 per share. FY23 earnings estimates have been increased by nearly 3% and are projected to grow 12.7% YoY.
Image Source: Zacks Investment Research
Amazon
Amazon AMZN is another stock that has traded very strongly off the lows this last month. After forming a descending wedge, the stock broke out and traded aggressively higher. Now, I believe a pullback in the stock price may set up another robust year-end move.
Image Source: TradingView
Amazon also carries a Zacks Rank #2 (Buy) rating, indicating upward trending earnings revisions. Current quarter earnings estimates have been upgraded by 11.8% over the last month and are expected to grow an astonishing 262% YoY to $0.76 per share. FY23 earnings estimates have been boosted by nearly 20% and are projected to increase 276% YoY to $2.67 per share.
Image Source: Zacks Investment Research
Bottom Line
Both of these stocks have performed exceptionally well year-to-date, and I believe they will finish the year strongly as well. There are numerous bullish catalysts that could propel this market higher in the final quarter, but given the market’s overextension, I anticipate a modest pullback in the coming weeks.
Best of luck traders!
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
