Heavy losses are piling up for the stock market, meaning it’s not a great time for making new buys. Instead, investors should be scanning for stocks that are holding up to add to their watch lists. Five software stocks that are showing strength as the S&P 500 index, Dow Jones industrial Average and Nasdaq composite suffer distribution are Adobe Systems (ADBE), Red Hat (RHT), Palo Alto Networks (PANW), Fortinet (FTNT) and ServiceNow (NOW).
Adobe, Red Hat, Palo Alto Networks and ServiceNow all have IBD Composite Ratings of 99, the highest possible score. Fortinet has a Composite Rating of 98. The Composite Rating is based on a variety of fundamental and technical factors, including earnings and sales growth, profit margins, return on equity and price performance. All-time stock winners often have Composite Ratings of 95 or above near the start of their big runs.
All of these stocks have relative strength lines that are at or near record highs. The relative strength line measures a stock’s price performance vs. the S&P 500 index. Investors should always be looking for stocks with strong RS lines. Those are the true stock market leaders.
In a strong stock market, the RS line is a breakout specialty tool. In a struggling stock market like now, the RS line offers a quick way to identify quality names that are faring best. The RS line is blue in the charts below.
Adobe Systems
Adobe stock hit a new all-time high of 231.34 on March 20, with shares retreating to 215.02 in Friday’s stock market trading. Adobe is extended from a 186.37 buy point. Although Adobe has pulled back a bit from its high, the relative strength line has been on a tear and is holding up.
Red Hat
Red Hat has been trading sideways in a relatively tight range since hitting an all-time high of 157.22 on March 7. Even with Red Had stock declining over the past few sessions, the RS line is edging to a new high. Red Hat will report quarterly earnings this coming week.
Palo Alto Networks
Security software firm Palo Alto Networks’ RS line is hitting a new high, even with shares about 10 bucks below the high of 191.53 on March 12. Palo Alto Networks stock is extended from a cup base buy point of 156.95 initially cleared in mid-January.
Fortinet
Palo Alto Networks peer Fortinet has been on a steady climb, with shares up sharply since breaking out of a double-bottom base in October. Fortinet stock hit a high of 55.18 on March 21, and the relative strength line hit a fresh high Friday as shares fell a — relatively — modest 1.2% to 52.95 on Friday.
ServiceNow
It’s been a while since enterprise software name ServiceNow has presented a proper buying opportunity, but the stock has seen a considerable run-up since a bottom in February 2016. The RS is near a new high as ServiceNow holds near its March 14 peak of 176.56, closing Friday at 164.77.
