3 Mid-Caps Hitting New Highs

Mid-cap stocks have underperformed the S&P 500 index by a wide margin so far in 2019, with market players narrowly focused on the upper end of the capitalization spectrum due to trade wars and currency gyrations. However, a handful of these mid-sized plays have bucked the odds, posting new highs that reveal rapid growth trajectories, innovative products, and/or highly bullish outlooks.

Although there are minor disagreements, mid-cap stocks are generally defined as companies between $2 billion and $10 billion in market capitalization, falling in between more speculative small caps and blue chips found in the S&P 500 and Dow Industrial Average. Many mid-caps aren’t well-known to the trading public, which is a major positive because they aren’t as crowded with weak hands and are often under-covered by Wall Street.

This potent combination can generate a springboard for steady growth until they cross into blue chip status and become eligible for inclusion in larger funds and indices that move the financial markets on a daily basis. Just keep in mind another batch of mid-caps is always moving in the opposite direction, losing blue chip status through market share loss, corporate misfires, and/or noncompetitive products.

Let’s look at three mid-cap stocks hitting new highs in this tough summer market. Their resilience bodes well for higher prices into year’s end while offering diversification to portfolios that are typically over-loaded with to big caps. Even so, the thinly-traded late summer environment may not be the best time to jump on board so it makes sense to put them onto watch lists until they offer lower-risk buying set-ups.  

Marketaxess Holdings Inc (MKTX) operates an automated trading platform for bonds and other fixed income products. The stock tested the 2017 low at 171.45 in October 2018 and turned sharply higher, more than doubling in price into the July 2019 high at 393.78. It gapped down nearly 10% after missing quarterly estimates a few days later, but resumed its upward trajectory in August, posting an all-time high at 394.92 earlier this week.

This stock is moving in lockstep with the surging bond market, which is now extremely over-bought after the historic collapse in yields. In addition, price action since January 2019 has carved a rising channel, with the most recent uptick reaching resistance this week. Taken together with extreme bond technicals, a multiweek pullback is overdue, setting the stage for a test at narrowly-aligned channel support and the 50-day EMA in the 340s.

West Pharmaceutical Services Inc (WST) manufactures and distributes injectable products for the medical industries in the USA, Europe, and Asia. The stock has posted incredible gains in the last 6 years, lifting from the mid-20s to Thursday’s all-time high at 147.19. It’s been in rocket mode since beating expectations and raising guidance in July’s second quarter report, zooming more than 20% in just four weeks.

Rally momentum and volume have eased since August 8, indicating the uptick is getting long in the tooth but there’s been little or no selling pressure in this late summer market. That could change in September, with a downturn that shakes out weak hands and tests the powerful breakout above the 2018 high at 125. The July 25^th breakaway gap looks like a natural target for this pullback, potentially offering a low risk buying opportunity. 

Manhattan Associates Inc (MANH) provides supply chain and logistical management software solutions for multiple industries, The stock rallied within a few points of the 2015 high in the mid-70s in July and completed a multiyear cup and handle breakout that yields a long-term measured move target in triple digits. The rally ended just a few days after the 7 point breakaway gap, yielding a consolidation that’s drawing the outline of a symmetrical triangle.

This is typically bullish price action after a breakout, with the rally working off short-term overbought technical conditions while picking up a fresh supply of breakout buyers. Accumulation also looks solid as a rock, lowering odds the gap will fill at this time, but buyers may wish to wait until the current trading range establishes more easily visualized support and resistance levels.

These three mid-cap plays are hitting new highs, despite a tough summer trading environment.

Disclosure: the author held no positions in aforementioned securities at the time of publication.