Many stocks have had a strong year, which creates a dilemma for some investors. When should they take a profit? The question becomes more challenging when the bullish case for the stock still seems to be in place.
Timing matters. Investors with a long-time horizon are always better off holding on to shares. However, traders and investors who need to raise capital may find that even great stocks can be overvalued.
Each of these stocks has a strong long-term story, but may not be the best stock to buy now. Nevertheless, these are good stocks to watch when technical indicators suggest more strength.
1. Lam Research: Short-Term Momentum Suggests Waiting on This No-Brainer Stock
Lam Research (NASDAQ:) is essential to the continued demand for semiconductors. The company provides crucial equipment for wafer fabrication, specifically in the areas of etch and deposition. It also has a global client base.
Lam’s importance to the industry continues in its earnings report. On July 30, the company closed out its 2025 fiscal year with a beat on the top and bottom lines, with earnings per share (EPS) hitting a record level. Plus, the company’s gross margin grew for the fourth straight quarter and now exceeds 50%.
Add in a growing dividend, and Lam Research is a good stock in a semiconductor supercycle that still has room to run. But investors may need to be patient.
LRCX stock is likely to remain rangebound. The stock has increased since earnings, but less than the broader tech sector. Plus, sellers have come in to reverse the bullish momentum on two separate occasions. Bollinger Bands have constrained recent price action and show limited momentum based on the RSI and MACD.
Bulls will point to recent analyst notes raising the price targets for LRCX stock. However, for now, the stock is trading near its consensus target and will need a catalyst to increase the volume that could provide bullish momentum.
2. Arista: AI Darling Faces Valuation Roadblocks
Arista Networks (NYSE:) has benefited from the tremendous capital expenditure made by artificial intelligence (AI) hyperscalers. Arista provides Ethernet equipment and software solutions essential to AI infrastructure. In its most recent earnings report, the company noted that it’s the market share leader in data center switching.
That demand has been reflected in the company’s strong earnings reports over the past 12 months, during which the stock has risen by over 73%.
However, at over 55x earnings, there are valuation concerns. ANET stock trades at a significant premium to its historical average at a time when the stock is close to its consensus price target and 52-week high.
ANET stock has rallied after a post-earnings dip. But it’s now at a level of resistance near its all-time high (ATH) at a time when momentum indicators suggest the stock is approaching oversold territory. The stock is also trading above analysts’ consensus target, and although price targets are rising, the short-term upside may be limited without a pullback.
3. Shopify: Growth Story Meets Profit-Taking Pressure
Shopify (NASDAQ:) is one of the world’s leading e-commerce companies.
That might explain why SHOP stock is down over 7.5% in the 30 days ending Sept. 9.
The stock shot up approximately 32% after a double beat in its August earnings report, but is failing to hold those gains.
This is coming at a time when the stock trades at around 92x earnings. That’s significantly higher than the stock’s three-year average and suggests that there could be more profit-taking to come.
But profit-taking is not the same as rejecting Shopify’s investment thesis. Analysts are raising their price targets on SHOP stock, with most of the new targets well above the $150 consensus target.
SHOP stock has firm support around $137, and with the MACD looking ready to turn positive, investors may not have much longer to wait.