Market Momentum: 3 Stocks Poised for Significant Breakouts
After a slow start to the year, U.S. equities have surged to new record highs following President Trump’s inauguration. By Wednesday’s close, the SPDR S&P 500 ETF Trust (NYSEARCA: SPY) had gained over 4% for the week, bringing its year-to-date (YTD) return to an impressive 3.47%. This rally has been marked by unusually strong market breadth, with stocks from various sectors, including retail, communication services, and energy, showing positive momentum.
The current rally appears more balanced than in prior years when the so-called Magnificent Seven largely dominated market performance and breadth.
So, let’s look at three stocks from three different sectors on the verge of a breakout.
On Holding AG: Outpacing Its Sector
Despite an underperforming retail sector, as evidenced by the SPDR Retail ETF (NYSE: XRT) being down 0.55% YTD, On Holding AG (NYSE: ONON) has demonstrated impressive relative strength. The company, which designs and sells high-performance running footwear and apparel globally, has outpaced its sector by climbing almost 7% on the year as of Wednesday's close.
Following a pullback toward its rising 50-day simple moving average (SMA) earlier this month, On Holding broke out to new all-time highs on Tuesday. While it retreated slightly on Wednesday, the stock’s ability to reclaim and maintain support above $60 could signal further upside. This $60 level is quickly emerging as a crucial inflection point, and traders should pay close attention to it going forward.
Analysts are bullish on the stock, with a consensus Moderate Buy rating and price target that forecasts the potential for additional upside. Morgan Stanley recently boosted its price target for the stock from $62 to $65, citing its strong gross margins and potential for sales growth acceleration. With the retail sector underperforming, On Holding’s resilience and upward trajectory make it a standout name.
Reddit Inc: New All-Time Highs and Continued Momentum
Reddit Inc.(NYSE: RDDT), known for its digital communities, such as the infamous WallStreetBets, has achieved fresh all-time highs this week. After consolidating above previous resistance at $160, Reddit turned this level into firm support over the past two months. On Tuesday, the stock surged above $180, confirming a breakout to new highs.
Technically, maintaining $180 from now on as support will be critical for Reddit’s continued upward momentum. However, the stock’s lofty valuation, with a forward P/E ratio of 222, might suggest some caution. Despite this, sentiment remains optimistic, with analysts assigning a Moderate Buy rating. Out of 21 analysts, most maintain favorable outlooks, though the consensus price target is approximately 14% below Wednesday’s closing price.
Traders should also monitor Reddit’s upcoming Q4 earnings report, scheduled for February 12. This event could be a significant catalyst, potentially sustaining or disrupting the stock’s current bullish trajectory.
Broadcom Inc: Positioned for a Bullish Breakout
Semiconductor giant Broadcom Inc. (NASDAQ: AVGO), a technology company renowned for its global presence in designing and developing semiconductor and infrastructure software solutions, is currently in a significant bullish consolidation near its all-time high. This movement coincides with the Trump administration and tech giants like Oracle, Microsoft, and OpenAI, announcing the formation of a new company named Stargate. This venture aims to bolster artificial intelligence infrastructure in the United States with an initial investment of $100 billion, with plans to increase this to up to $500 billion in the coming years.
Following this announcement, the Semiconductor ETF (NASDAQ: SMH) broke out from a prolonged consolidation phase, while several semiconductor stocks saw substantial upward momentum on Wednesday. AVGO, which previously broke out after stellar earnings in December, has been consolidating near its peak in a bullish pattern.
Should AVGO surpass the short-term resistance of $247, it might signal the start of another significant upward trend.
AVGO holds a Moderate Buy rating, echoing the sentiment of the above stocks. Recently, analysts from Barclays and Mizuho have also raised their price targets for the stock, reflecting optimism about its future performance.
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