As the major indexes notch more record highs, investors should be looking to lock in some well-earned gains in stock market leaders such as Google-parent Alphabet (GOOGL), Arista Networks (ANET) and Royal Caribbean (RCL).
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Featured in the IBD Stock Spotlight screen, Google, Arista and Royal Caribbean all have reached the 20%-25% profit-taking zone from recent buy points. That means that investors should take at least some profits off the table. A handful of these double-digit gains can make for a good year. In addition, it keeps your capital flexible and your profits secured, a nice combination.
Every investor will take losses. There are no exceptions, even among the pros. If you can limit your loss on each trade at 7% to 8%, and take gains on most of your winners at 20% to 25%, you are trading smart. It means that you could be wrong on three of every four trades and still come out even or marginally ahead in the game.
The strategy says sell, but that doesn’t necessarily mean liquidate an entire position. Consider selling at least half your stake. In a volatile market, the strategy of raising cash and minimizing risk becomes even more attractive.
Google Stock
Google stock is trading squarely in the 20%-25% profit zone from a 153.78 buy point, per IBD MarketSurge chart analysis, following an April 1 breakout. Shares rallied 1.1% midday Wednesday, just shy of their record highs.
Shares picked up steam on April 26 after Alphabet reported first-quarter earnings and revenue that handily beat analyst estimates. The company also announced its first-ever dividend.
Alphabet reports second-quarter earnings on July 23. Analysts will look for management’s view on the rollout of “AI Overviews” — Google’s generative artificial intelligence search product.
Arista Touches Profit Zone
Arista Networks is a networking giant and a key member of the artificial intelligence boom, just like Google stock. This week, Arista stock briefly hit the profit zone before reversing lower. Shares are 18% above a cup base’s 307.74 entry amid a 0.6% drop midday Wednesday.
First-quarter earnings rose 39% vs. year earlier, with the pace expected to cool to 14% for 2024 and 13% in 2025. Revenue growth has slowed for the past six quarters, to 16% in the first quarter.
Shares have been trending higher since mid-2022, though often with choppy action. In addition to its own earnings and outlook, Arista Networks will swing on capital spending guidance from key customers Microsoft (MSFT), Meta Platforms (META) and Oracle (ORCL).
Royal Caribbean Hikes Outlook
Travel leader Royal Caribbean climbed 0.1% Wednesday, inside the 20%-25% profit zone from a 133.77 cup-base entry after a March 20 breakout.
On Feb. 21, Royal Caribbean hiked its 2024 earnings forecast, citing stronger-than-expected vacation demand. That kick-started the most recent advance to big gains.
And on April 26, the cruise line cleared first-quarter estimates and hiked its outlook on a huge wave of demand. Royal Caribbean reported adjusted earnings of $1.77 per share, improving from a loss of 23 cents per share last year. Total revenue leapt 29% to $3.73 billion.
The cruise giant said this has been the strongest “wave season” in company history from both a demand and pricing standpoint. The wave season offers extra deals from January through March.
Follow Scott Lehtonen on Twitter at @IBD_SLehtonen for more on Google stock, other best stocks to buy and watch and the Dow Jones Industrial Average.
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