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On the Move: 3 Stocks in Bullish Territory

Rick Orford - Barchart - Wed Mar 22, 2023

In a bearish market, picking stocks to trade can be challenging, but it’s not impossible. Investors can always look at stock performance, news, fundamentals, etc., to pick potential investments. But if investors are looking to buy into the stock and time their entries for the best price possible (and hopefully jump into a trend), one of the most popular technical indicators comes into mind, the RSI. 

RSI, or the Relative Strength Index (RSI), is a technical momentum oscillator calculated based on the intensity of recent price movements. RSI is displayed on a scale of 0 to 100, where 100 is the most overbought and 0 is the most oversold. An RSI indication above 70 is considered overbought, 50 is considered neutral, and below 30 is considered oversold. Similarly, a break above 50 signals a potential change into a bullish trend, and a break below signals a potential change into a bearish trend. That said, the RSI shouldn’t be confused with a buy indicator- rather, it’s a starting point. Think of it like one large piece of a puzzle.

Let’s look at 3 dividend stocks that recently broke above the 50-point RSI mark and are signaling a move in a bullish direction.

Ecolab, Inc. (ECL)

Ecolab, Inc. is a company that provides services and technological systems for water treatment, cleansing, cleaning, and hygiene to over 3 million customers. It was founded in 1923. The company is headquartered in Saint Paul, Minnesota, with more than 47,000 workers. Currently, ECL operates in more than 170 countries, and the company’s operations are divided into 11 divisions:

Ecolab, Inc. is set to pay its 2nd interim dividend for this fiscal year on April 17, 2023, for $0.53 and a dividend yield of 1.36%. ECL has increased its dividend for 31 years and is part of the coveted Dividend Aristocrats index.

What do the analysts say?

Analysts rate Ecolab, Inc. as a “Moderate Buy” based on 10 Strong Buys and 10 Holds recommendations. The mean target is $171.65, and it’s high target price is $210.00, representing a potential upside of 33.01%.

Should you buy it?

Ecolab Inc. is currently retesting its downward-sloping trend line after trying to establish support around the $155.00 area and bouncing above the 50-day simple moving average (red SMA). It closed above the 50-point mark on its RSI signal, which can signal a potential change in trend. Investors should keep tabs for a potential follow-through on price action to ensure they properly manage the risk when getting into the trading ECL.

Linde PLC (LIN)

Linde Plc is a multinational diversified industrial gas, chemical, and engineering conglomerate. It is one of the leading companies in industrial gases and the engineering sector. The company was created in October 2018 through the union of Linde AG and Praxair. Its headquarters are in Dublin, Ireland, and Woking, Surrey, UK. Additionally, the company employs ~65,000 employees. Linde Plc has operations all over the world, and the company’s operations are mainly divided into two segments:

  • The Gases segment provides industrial, specialty, medical, refrigerants, and other chemicals to various clients from different industries. 
  • The Engineering segment, famously known as Linde Engineering, offers design and construction services for building large-scale chemical plants that are used to produce industrial gases. This segment has built over 4,000 plants worldwide. It also has over 1,000 process patents.

Linde Plc is set to pay its 1st interim dividend for this fiscal year on March 28, 2023, for $1.275 - representing a dividend yield of 1.49%. Moreover, the company has been increasing its dividend for 31 years and is part of the coveted Dividend Aristocrats index.

What do the analysts say?

Analysts rate Linde Plc as a “Strong Buy” based on 15 Strong Buys and 2 Holds recommendations. The mean target is $372.69, and the high target price of $418.00 represents an upside potential of 22.47%.

Should you buy it?

Linde Plc has been in a medium-term bullish trend and has attempted to break out of its immediate resistance at $347.38. However, it failed to maintain its price above the resistance and immediately dropped and tested its 100-day moving average (green SMA) dynamic support. RSI broke above the 50-point mark and is signaling a potential continuation of its trend. Investors should monitor how the price behaves above the $347.00 area for confirmation of the breakout, as the RSI value indicates the stock has just stepped into bullish territory.

Cintas Corp (CTAS)

Cintas Corporation is a company that provides over one million businesses with various products and services such as workwear, carpets, wipes, janitorial supplies, first aid and safety equipment, and courses. The company was founded in 1929 and is currently headquartered in Cincinnati, Ohio. Today, the company employs roughly 43,000 employees in 462 operational facilities and 13 distribution centers. CTAS’ operations are divided into seven sectors based on the solutions, services, and products they provide:

Cintas Corp paid its 1st interim dividend for this fiscal year last March 15, 2023, for $1.15 - representing a dividend yield of 1.04% based on the stock’s latest trading price. CTAS is expected to announce its next dividend in the 2nd week of April based on its historical announcements. CTAS has been increasing its dividend for 39 years and is part of the coveted Dividend Aristocrats.

What do the analysts say?

Analysts rate Cintas Corp as a “Moderate Buy” based on 6 Strong Buys, 6 Holds, and 1 Moderate Buy recommendation. The mean target is $492.00, and the high target price of $525.00 means investors could potentially see an upside of 18.48%.

Should you buy it?

Cintas Corp is currently trading within a bullish channel. Prices just closed above their 50(red line) and 100(green line) day simple moving average. RSI broke above the 50-point mark and is currently tightening, which can lead to a thrust up or downwards, depending on price action. 

Investors should keep an eye on how price moves in the next few days as a potential additional bullish signal may come into play by crossing both short-term and mid-term averages. It is always best practice for any investor to include confirmation signals in their investment strategy to maximize their timing in making any potential investments in a company.

Final Thoughts

Using RSI to find companies that could shift their direction or continue their bullish trend is crucial in trading stocks. RSI gives investors an idea of how prices behave and spots opportunities to ride any breakouts or avoid potential dangers. However, investors should still employ proper risk management to ensure that losses incurred can still be handled by their portfolio, as risk always comes slowly, then all at once.


 



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On the date of publication, Rick Orford did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.

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