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What are we looking for?

High-flying U.S. stocks with significant price run-ups in 2017 that may now be getting overstretched.

So far, 2017 has been a great year for U.S. stocks, with the major indexes logging double-digit gains. The broad S&P 500 is up 14 per cent year to date, putting it on course for the best annual performance since 2013. Many individual stocks have also seen huge gains, with many widely held stocks up 20 per cent, 30 per cent and even 40 per cent year to date. At some point, one must wonder if the current euphoria is overdone and if some of these stocks are due for a pullback.

The screen

We will be using Recognia Strategy Builder to search for high-flying U.S. stocks that may be getting overstretched.

We begin by setting a minimum market capitalization threshold of $5-billion to focus on larger, more stable and established companies in the market. Next, we will look for companies that are trading within 2.5 per cent of their 52-week highs. We will also specify stocks with prices that are up by at least 35 per cent year to date.

Finally, in order to select stocks showing signs of being overbought, we will use a technical oscillator known as RSI (relative strength index). RSI measures a stock's current relative strength compared with its own price history. We will consider only stocks that have had a recent bearish RSI event flagging an overbought condition.

More about Recognia

Recognia is a global leader in automated quantitative analysis and engagement solutions for retail online brokers and institutions. Recognia's product suite provides actionable trading ideas based on technical and fundamental research covering stocks, ETFs, indexes, forex, options and commodities.

What did we find?

Transunion is a U.S. credit bureau providing credit information on more than one billion individuals in 30 countries. After a strong performance through most of 2017, the stock was hit hard in early September after the Equifax data breach was announced. After dropping more than 15 per cent, the stock resumed its rally and is now up more than 60 per cent year to date.

With a year-to-date stock price increase of 109 per cent, NRG Energy Inc. is among the best-performing stocks on our list. NRG is an electric power utility based in the northeastern United States. Many U.S. utility stocks were hard hit in 2016 as concerns about rising rates saw investors flee for less-interest-rate-sensitive stocks. Investor expectations of muted interest-rate hikes have helped NRG stock more than double in 2017.

One of the largest companies on our list is cruise-ship operator Royal Caribbean Cruises Ltd., with a market cap of more than $26-billion. In spite of a worse-than-normal Caribbean hurricane season in 2017, Royal Caribbean stock is up 52 per cent year to date and is now trading only 1 per cent off its 52-week high.

If you don't own these stocks currently, you can watch for a pullback to consider that as a potential entry point. But if you own these stocks and plan to hold them for the long term, caution would be warranted.

The investment ideas presented here are for information only. They do not constitute advice or a recommendation by Recognia Inc. in respect of the investment in financial instruments. Investors should conduct further research before investing.

Peter Ashton is vice-president of retail and self-directed investing at Recognia Inc.

Select high-flying U.S. stocks

RankCompanyTickerMarket Cap. ($ Bil U.S.)Percentage Chg from 52-Week HighPrice Performance Year-to-DateDividend Yield
2NRG Energy Inc.NRG-N$8.1-2.1%109.5%0.5%
3Centene Corp.CNC-N$16.8-2.4%70.5%0.0%
4Ferrari N.V.RACE-N$21.7-2.1%99.0%0.6%
5Royal Caribbean Cruises Ltd.RCL-N$26.8-1.0%52.1%2.0%
6Progressive Corp.PGR-N$28.8-0.8%39.1%1.4%
7PRA Health Sciences Inc.PRAH-Q$5.1-1.1%47.1%0.0%
8Agilent Technologies Inc.A-N$21.4-0.4%46.2%0.8%
9Euronet Worldwide Inc.EEFT-Q$5.2-0.6%37.2%0.0%
10The Chemours Co.CC-N$10.1-0.1%148.9%0.2%

Source: Recognia