Market players tend to focus their capital on just a handful of well-known Nasdaq-100 components, like Apple Inc. (AAPL), Microsoft Corp. (MSFT), and Tesla Inc. (TSLA). Another sizable group just trades the index as a whole, through Investo QQQ Trust or the CME index futures contract. However, many lesser-known components have carved stronger price action since March 2020, or have outperformed their Silicon Valley rivals for a decade or more.
Traders and market technicians can uncover these hidden gems by sorting a list of Nasdaq-100 index components by relative strength. There are many ways to accomplish this task but the most effective method I’ve found is to list securities by relative positioning above or below their 200-day exponential moving averages (EMAs). Not surprisingly, running a list in this mixed autumn market reveals three companies that required searches to find out how they make money.
Pinduoduo Inc. (PDD) was added to the Nasdaq-100 index in August. The Shanghai-based company operates a hugely-popular mobile e-commerce platform that specializes in apparel, appliances, and household goods. The stock now sits at the top of the index performance list, carving a series of new highs while better-known tech stocks grind through fourth quarter corrections. However, this isn’t a cheap security by any metric, with a 363% 2020 return-to-date.
Align Technology Inc. (ALGN) manufactures and markets Invisalign clear dental aligners and iTero intraoral scanners, as well as other products for dentists and orthodontists. The stock posted a 3-year low in March 2020 and turned sharply higher, completing a breakout above the September 2018 high near 400 in October. It posted an all-time high at 507 on Nov. 9 and pulled back, testing new gains. It’s now approaching support, setting the stage for further upside.
Cintas Corp (CTAS) provides janitorial and safety-oriented uniforms and business services in North America, Latin America, Europe, and Asia. This is one of the top Nasdaq-100 performers in the last decade, despite their relatively humble business model. The stock got cut in half during the first quarter’s pandemic decline and bounced strongly, recouped 100% of the losses into June. An August breakout is now gathering steam, opening the door to significant upside.
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Disclosure: the author held no positions in aforementioned securities at the time of publication.