Skimming for Outperformers

 | May 31, 2012 | 11:30 AM EDT
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On days like Wednesday, in addition to tracking inverse ETFs that could offer opportunity to capture some gains from the market's downside trade, I also monitor which stocks are bucking the trend and notching gains.

One low-priced name that I've had on a watch list for about a week is SciClone Pharmaceuticals (SCLN), which advanced Wednesday as the market declined. On Tuesday, the company said it would increase its share-repurchase program. That likely helped spur price gains on a day when the wider market melted down.

Though it's headquartered in California, the company sells into China treatments for hepatitis, cancer and a host of other ailments.

SciClone shares have been consolidating nicely since they retreated from a multiyear high of $6.97, reached March 14, after the company reported its fourth quarter. The stock rallied above its 50-day moving average this week, but has some work to do before it'll pass intermediate resistance at $6.72. Shares closed Thursday at $6.31.

Wall Street expects double-digit earnings growth from this company in the next two years. Many stocks in the biotech subsector of healthcare are strong performers now, and that's another factor that bodes well for SciClone.

From the retail category, meanwhile, comes The Fresh Market (TFM), a natural and organic grocer that went public in November 2010 at $22. After an initial run-up, the stock struggled in 2011, but it began trending higher again in December of last year.

May is setting up to be The Fresh Market's sixth month in a row of gains. As of Wednesday's close, the stock was up 9.7% for the month, having zoomed nearly 15% Wednesday following reported first-quarter results. Sales and earnings beat views, and the company issued optimistic guidance.

The Fresh Market rallied to an all-time high Tuesday and reached its best-ever closing price, $56.15. In a bull market, this stock would be in buy range, even after the gap-up. It's not unusual for a stock to rocket higher like this, and then pull back as traders who bought at a lower price pocket some profits.

The big upside move in a downward-trending market is a sign that institutional buyers have confidence in the stock. That often bodes well for a further uptrend after the market goes back into rally mode.

Another mid-cap that saw gains Wednesday was Copart (CPRT), which auctions salvaged autos for commercial and nonprofit customers. The company reported its third quarter Tuesday, meeting earnings views but missing on the top line. Still, improving margins cheered investors, who sent the stock to a higher close.

The stock has shown some sloppy trade recently, rather than consolidating in a more orderly fashion. That often indicates a stock that is not quite ready for a big rally. But, because the market downturn is keeping me from entering many long positions at the moment, if the market continues to correct I'll give Copart more time to potentially form a better chart pattern.

The fundamental potential looks good, with analysts expecting double-digit profit increases in 2012 and 2013. While earnings potential is perhaps the biggest factor that attracts institutional investors, it's not a useful gauge to determine buy or sell points. Rely on charts for that instead. That said, no matter how good a chart may be at the moment, it would be risky to go long when a fresh downdraft can pull almost any stock lower.

Columnist Conversations

I reached out last week to my close friend Ken Shreve, who is a prominent writer for the IBD.  I asked Ke...
I reached out last week to my close friend Ken Shreve, who is a prominent writer for the IBD.  I asked Ke...
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