When it comes to the market and especially leading, Top Ten-type stocks, we’re increasingly seeing a game of ping pong occur—one day, the market and most stocks are up, but a day or two later will see selling, with many names that were perking up smacked right back down. We learned long ago not to anticipate things, so we continue to lean bullish but are also being selective. We’ll move our Market Monitor back to a level 7, but the real key is to remain flexible and take things on a stock-by-stock basis.

Meanwhile, our screens continue to find strong situations, including some decent setups should the market get moving. Our Top Pick this week is a name from the chip sector that erupted after earnings in February, but has spent two months calming down and is now standing just above support. A resumption of the rally from here would be tempting.

Stocks are coming off a rare down week, though the “damage” was mostly limited to last Thursday after a couple rogue Fed members came out with some hawkish quotes (though, in fairness, this happens just about every month). Still, the bull market is very much intact, and it’s a great time to go looking for growth stocks at value prices. As the new Chief Analyst of Cabot Value Investor, I just added such a stock to that portfolio, so today’s new Stock of the Week recommendation comes from yours truly. It’s a giant in the auto industry that is benefitting greatly from Americans’ burgeoning appetite for hybrid cars.

For the past six to nine months the consensus among traders had been that the Federal Reserve would be cutting interest rates this year, and some thought it would be aggressive cutting. However, that narrative may have changed on Thursday as two Fed members noted that the central bank might not cut at all in 2024. This sent shockwaves through the stock market Thursday and Friday.

For the past six to nine months the consensus among traders had been that the Federal Reserve would be cutting interest rates this year, and some thought it would be aggressive cutting. However, that narrative may have changed on Thursday as two Fed members noted that the central bank might not cut at all in 2024. This sent shockwaves through the stock market Thursday and Friday.

Most of the evidence remains bullish, so we continue to hold our winners and selectively put money to work — but the fact is that most growth stocks have been chopping sideways overall for a month or two, so we’re OK holding some cash and waiting patiently for the market and leaders to show their near-term hand. Tonight, we’re booking a little more partial profits in one of our winners, but are standing pat otherwise and will follow the lead of the market—and of leaders—going ahead.

After years of being either ignored or sold off, value stocks are finally having a moment on Wall Street. The Vanguard S&P 500 Value Index Fund (VOOV) is up 25% in the last five months and is actually outpacing growth titles over the last month. Still, it’s a bull market, and growth stocks are king. How to compete as value investors in a growth-minded market? By seeking growth stocks at value prices.

Today, we do just that, adding a household name that’s been rejuvenated thanks to a shift in industry trends. The stock is up 18% year to date, and yet its shares remain dirt cheap by virtually every measure.

Enjoy!

There is a growing mental health crisis going on out there.

But it’s starting to be addressed by a tiny, unknown (so far) company with a virtual care platform that’s beginning to make a difference across the U.S. And it’s doing so while growing both the top and bottom lines.

All the details are inside the April Issue of Cabot Small-Cap Confidential.

It seemed like the post-Fed action from two weeks ago may have paved the way for another leg up in the leadership. While that’s not off the table, we’re continuing to see a lot of crosscurrents out there as money sloshes around. What does it mean? Not much yet, as the major evidence remains positive.

It seemed like the post-Fed action from two weeks ago may have paved the way for another leg up in the leadership, but while that’s not off the table, we’re continuing to see a lot of crosscurrents out there as money sloshes around. What does it mean? Not much yet, as the major evidence remains positive, but it’s best to continue to raise and honor your stops, while for new buying, make sure you’re focusing on names that are generally earlier in their moves. We’ll leave our Market Monitor at a level 8, but more than ever, it really depends where you look.

This week’s list has many names that are either just coming into favor or have tightened up nicely after prior runs. For our Top Pick, we’ll go back to the commodity theme, with a stock that’s toying with new highs despite the fact that natural gas is still at very low levels. We’re OK starting small here and adding if the buying continues.

Stocks keep rolling into spring on the heels of an excellent first quarter. Can the next three months match the previous three (or five)? Probably not. But bull markets don’t normally die of old age, and there are plenty of reasons to believe stocks will be higher by the end of Q2. With that in mind, today we add another beneficiary of artificial intelligence, though a company that’s not entirely dependent on AI. Instead, it’s one that’s found new life thanks in part to AI – similar to Microsoft (MSFT) when we added it to the portfolio a year ago. It’s been in Carl Delfeld’s Cabot Explorer portfolio for months, and today we welcome it to Stock of the Week.

As I noted last week, this is a shortened version of the normal Monday Weekly Review as the Mintz family just got back home late last night from a short Spring Break trip. I am back at the trading desk today, and all Cabot Options-related services will run as normal this week.

As I noted last week, this is a shortened version of the normal Monday Weekly Review as the Mintz family just got back home late last night from a short Spring Break trip. I am back at the trading desk today, and all Cabot Options-related services will run as normal this week.

WHAT TO DO NOW: Remain optimistic. The market and leading stocks have finally begun to pull in somewhat, but the action has been completely normal so far and our market timing indicators are bullish. We’ve put a good chunk of money to work of late, and tonight we have one small addition—we’ll add a half-sized position (5% of the portfolio) in DraftKings (DKNG), which seems to be set up well. That will leave us with around 35% in cash, which we’ll aim to put to work (including, ideally, by filling out some existing positions) if the market continues to behave itself.

Fed Chairman Jerome Powell again threw a wrench into the market by warning that a couple of more interest rates hikes are probable this year. “The process of getting inflation down to 2% has a long way to go,” he told the House Financial Services Committee during a three-hour hearing. Not sure why they don’t get this over with.

Indian Prime Minister Narendra Modi arrives in America on his first official state visit with India’s geopolitical pull higher than at any point since he took power in 2014.

Small caps are off about one percentage point over the last week while the S&P 500 is almost dead flat.

All things considered, that feels like a win to me – largely because the Fed signaled potential for two more rate hikes throughout the year. The Fed’s rate hike program has been the market’s bogeyman for over a year. The message the market is sending now is that, yeah, you might keep us on our toes, bogeyman, but we’re not scared any more. You can be dealt with.

The impressive rally that has confounded so many may be running out of gas.

As of Friday’s close, the S&P 500 is up about 15% YTD and over 20% from the October low, making it officially a new bull market. Investors are optimistic that inflation is falling, the Fed is almost done hiking, and there is no recession in sight. The market is sensing that we can get through this rate-hiking cycle without much pain.

But this rally is not as impressive as it seems. Only about 10 large technology stocks account for just about all the YTD gains. The other 490 stocks on the index have collectively gone nowhere.

“Don’t fight the tape” is a famous expression that I’ve learned to appreciate.

I don’t know who coined the expression, but it refers to the practice of not going against the prevailing trend or momentum of the market.

The phrase emphasizes the idea that it is generally unwise to take positions that oppose the direction of the overall market trend.

Here in New England, the weather can change quickly. A sunny morning can seemingly without warning turn into a rainstorm by the afternoon. Not that long ago, we had three seasons in a single day – snow in the morning, followed by rain, then summer-like temperatures by three in the afternoon. There’s an old saying, “If you don’t like the weather, wait a few minutes.”

It has been a fabulous rally that has proven naysayers wrong. The S&P 500 is up about 15% YTD just before the midpoint. Stocks have also rallied more than 20% from the October low into a new bull market.

How much gas is left in the tank?

Inflation is falling and the Fed is almost done hiking rates. It is also looking less likely that there will be a recession this year. Investors are optimistic that we can get to the other side of this hiking cycle without too much pain.

This past week, none of our companies reported earnings and there were no ratings changes. Shares of ESAB Corp (ESAB) are approaching our 68 price target, so we continue our review of this recommendation. The next earnings report is from Walgreens Boots Alliance (WBA), scheduled for June 27.

Cabot Options Institute Quant Trader is focused exclusively on creating consistent returns using high-probability options strategies including bear call spreads, bull put spreads, iron condors and more. Whether you have questions about the strategies, or even about setting up your account, or how to make your own trades, Andy will answer all of your questions

The big news this week was, of course, that the FOMC decided to pause and not hike interest rates at the June meeting. But as expected they suggested that a couple more 25-basis point hikes are in the cards throughout the rest of the year.


It feels like this “we want to keep you guessing” messaging is partly due to wanting to see how more data comes in and partly to keep investor expectations in check. The latter seems especially relevant given the S&P 500 just moved into a new bull market and AI enthusiasm has pushed a number of the MegaCap stocks to new highs.

Cabot Options Institute Income Trader is focused exclusively on the creating consistent income through a variety of options selling strategies. Whether you have questions about selling puts, covered strangles, jade lizards or our income wheel approach, Andy is more than happy to help you steepen your learning curve in this live event.

Cannabis stocks are about to make a big move over the next several weeks. This is a good trading opportunity.

What is going to send the group higher?

The Senate should take significant steps to advance key bank sector reform that would help cannabis companies, say lobbyists.

The market is testing key levels, as are many indicators, but today’s bounce is a small positive. Today’s bulletin is about Shift4 (FOUR), which cracked support on huge volume two weeks ago and hasn’t been able to bounce at all since. We’re going to sell one-third of our position today and see what earnings brings tomorrow. Our cash position will be around 38% after the sale.

Expensify (EXFY) reported after the bell yesterday and revenue was a touch light (2% miss) while EPS beat expectations on the back of strong margins. Revenue rose 7.8% to $43.5 million (missed by $850K) while adjusted EPS of $0.07 beat by a penny. Management reaffirmed long-term revenue guidance of 25% to 35%.

With the SPDR S&P 500 ETF (SPY) trading for 397.25, I want to place a short-term iron condor going out 57 days. As always, my intent is to take off the trade well before the April 21, 2023, expiration date.

WFC rallied over the past expiration cycle and as a result, our February 17, 2023, 45 calls were assigned, and our entire position was “called” away last week. We made 10.17% on the trade.

Earnings Updates: FTI, PWSC, OPCH

TransMedics Group (TMDX) reported another terrific quarter after the bell yesterday that should have shares trading higher today. Revenue grew 223.7% to $31.4 million (beating by a whopping $7.8 million) while GAAP EPS of -$0.21 improved from -$0.46 in the year-ago quarter and beat by $0.11. That result caps off a year in which TransMedics grew revenue by 209% to $93.5 million.

Sprout Social (SPT) reported Q4 results after the close yesterday that were close to expectations as bigger deals, partnerships (i.e., Salesforce.com) and price increases drove revenue and annualized recurring revenue (ARR) higher, despite a challenging market for IT spending. Revenue in Q4 was up 30.8% to $69.7 million (missed by $200,000) while adjusted EPS of $0.03 increased from -$0.05 a year ago and beat by $0.05.

Just 12 days ago we added a bear call spread in DIA. The recent decline has given us the opportunity to take some nice profits off the table.

We allowed our February 17, 2023, 59 puts to expire worthless. As a result, per our Income Wheel guidelines, we will remain mechanical and sell more puts in KO today.

As part of the Income Wheel approach, we allowed our GDX puts to expire in the money at expiration last week. As a result, we were issued shares at our chosen put strike of 29.

I will be exiting the Home Depot (HD) trade today.

A few Cabot Options Trader subscribers have asked me about ways to protect gains in their portfolios, so I thought I would write to everyone with a couple of strategies using options to hedge your portfolio.

A subscriber recently asked me if I keep a journal of my trades. Many traders keep journals so they can look back at their trades and evaluate what they did right and what they did wrong.

Want to know how the big institutional investors use options? Here is an example of how one trader spent $132 million on three technology stocks.

Options trading has its own vernacular. To know how to do it, you need to know what every options term means. Here are some of the basics.

Our Cabot Top Ten Trader’s market timing system consists of two parts—one based on the action of three select, growth-oriented market indexes, and the other based on the action of the fast-moving stocks Cabot Top Ten features.