Stocks finally had a bad week on the heels of a two-month, off-the-bottom rally that hadn’t relented since mid-June. One bad week doesn’t mean we’re destined to return to the kind of selling we saw in the first half of 2022. But the retreat was sharp enough to sell three of our weakest performers and add some safety in the form of another dividend stock. But the newest addition to the portfolio, courtesy of Tom Hutchinson, isn’t some stodgy utility company. It’s a fast-growing technology company whose stock is starting to regain traction with investors.

Details inside.

The market continues to hover around near-term highs, while in a short-term overbought state. Moreover, the 200-day moving average is acting as an area of strong overhead resistance and we have a large gap that has yet to close from August 10. When combined with a VIX that is hitting a strong area of support, well, it looks like we could see a bit of weakness ahead, at least over the short term.

As esteemed analyst Jason Goepfert pointed out this week, we have to remember “the S&P 500 has more assets benchmarked against than any other global index. And the 200-day moving average is the most consistently used indicator among those who look at price charts,” especially for longer-term trends.

We had the good fortune to lock in two winning trades this past week in Home Depot (HD) and Walmart (WMT). Our win ratio now stands at 50%, well below the expected rate of 80% to 85%. That being said, we are just under break-even for the earnings cycle with the understanding that the law of large numbers will come to fruition as we continue to place more and more statistically-based trades.

As I’ve said numerous times and will again as a reminder during the upcoming webinar, my first three trades when I started using this approach back in 2017 were losing trades. In fact, they were big losers. I’m talking -34%, -40% and -60%. Yet, 117 trades later, when all was said and done, the cumulative total of the strategy was 932.2%.


Remember, the law of large numbers is defined by increasing the sample size, in our case the number of trades, and so far we only have eight trades under our belt. As I’ve stated over and over, just because a coin flip has a 50% probability of success, it doesn’t mean that for every 10 flips five are going to be heads and five tails.

As I spoke about in our monthly subscriber-exclusive call, the ongoing market rally helped us to have a wonderful expiration cycle. We were able to lock in 11.4% in total premium and our BITO position is now above break-even. We still have a small loss in GDX, but the premium we’ve managed to bring in over the past two expiration cycles far outweighs the miniscule decline in GDX.

I want to ladder our trades so that we are bringing in a steady stream of premium every week to two weeks. So far, so good.



I plan to add several more new positions to the mix over the next week or so and buy back a few of our put positions (KO, WFC), lock in profit and sell even more premium in the same underlying stocks.

Explorer stocks had a mixed week due to weaker market and some profit taking as SQM reported another strong quarter with earnings up 857% year-over-year. Positive second-quarter corporate earnings reports and the flattening of still-high inflation seemed to settle investor nerves and despite this week’s pullback, the S&P is up 17% from its June lows. This week we go to a big resource play on a strategic growth trend that is powered by Dr. Copper.

In the August Issue of Cabot Early Opportunities, we continue to lean into the market rally, be it bear market rally or new bull. We step up to the plate with a partial position in a biotech stock I’ve been eying, jump into a rapid-growth security software name and also a fintech company in a recovering industry. Two more conservative growth ideas are added to our Watch List and may fit the bill down the road should the market soften.
Enjoy!

The narrative coming out of last week was that inflation has peaked, which could in turn slow down the Federal Reserve’s aggressive rate hike trajectory. A potentially less hawkish Fed helped spark a market rally as the S&P 500 gained 3.29%, the Dow rose 3%, and the Nasdaq added yet another 3.1%.

Investors remain in a buying mood, as last week’s lower-than-expected Consumer Price Index (CPI) number added fuel to the recent rally. With inflation still high and a recession likely upon us, another correction may be in the offing. But for now, it’s time to buy. This week, we add a dirt-cheap mid-cap stock from new Stock of the Week contributor Clif Droke, Chief Analyst of our Cabot SX Gold & Metals Advisor. It’s from an industry that never goes out of fashion and is gaining steam from the shifting automotive landscape.

Details inside.

It’s not perfect, but the market has been putting one foot in front of the other in recent weeks, with more stocks acting well, more breakouts and the indexes refusing to pull in much. As always, we’re really just taking our cues from the trend of the market (intermediate-term trend up; long-term trend still down but getting close to flipping) and the action of leading stocks (better and better, but still not a bunch of new highs). We’re nudging our Market Monitor up to a level 6, though we’d still favor going slow overall and, ideally, entering on weakness.


This week’s list is another solid batch of stocks with excellent charts, including many that have really stormed ahead on big volume. Our Top Pick looked like it was done for a couple of months ago, but has stormed back to new highs thanks in part to a great post-earnings reaction.

What a difference an expiration cycle makes!

The close of the June expiration cycle, back on the 17th, marked the low set in 2022. The SPDR S&P 500 ETF (SPY) hit an intraday low of 362.17 before rallying to close the June expiration cycle at 365.86.



Who knew that was just the beginning of what would become a historic short-term rally? Since then, the market has rallied an astounding 16.7%.

The ongoing market rally has made it incredibly easy for all of our positions. We are seeing nice profits in almost every position, with PFE being the exception as it’s slightly below its break-even.

We will need to roll the remainder of our August positions (BITO, GDX) into September next week and if we do see a short-term pullback, I plan on adding a few more positions to the mix. If GDX and BITO manage to keep climbing and close above their short call strikes we could be in for some nice 20%+ winners. If not, no worries, we will continue to sell calls and lock in profits along the way.

Next week offers up several wonderful opportunities. Home Depot (HD), Walmart (WMT), Lowe’s (LOW), Target (TGT) and Cisco Systems (CSCO) are all due to announce and my guess is that we will take at least two if not three of those trades. In fact, there is a good chance that we will have two trades on Monday as HD and WMT are due to announce before the opening bell.

This past week we had another trade that exceeded the expected move. We placed an iron condor around Disney’s (DIS) expected move, yet once again, our short call strike was tested. We ended up getting out of the trade for a small loss, but had we held on just an hour or two longer we would have had a nice profit as DIS pushed below our short 121 call strike and into profitable territory.

Today’s note includes earnings updates, ratings changes and the podcast.

The quick rebound in the major indexes and many growth stocks this week has been very encouraging—it doesn’t completely clear the air from some of the abnormal action last week, but it’s definitely a plus. We remain mostly bullish, though we continue to pick entries carefully, especially with so many stocks reporting earnings in the next couple of weeks.

The fourth quarter earnings season is well under way and the results have been somewhat spectacular so far, and much better than expected.

What a wild week! Even though I’m not long or short GameStop (GME), it was hard to take my eyes off its stock over the past week. There are a lot of different takes on what it all means. Some believe it’s a sign of reckless behavior and a signal that the market must be near a top.

Today is a big up day in the market after the worst week since October.

Today’s note includes earnings updates, ratings changes, the podcast and the Catalyst Report.

For some time I’ve felt that we should be bumping up the upper end of our market cap range since the market’s evolution, and rising share prices, has made for somewhat slim pickings for high growth names in the under $3 billion market cap range. That is the rough upper end that I’ve been holding to for many years.

This week a number of Explorer stock retraced last week’s gains, with a major exception being the explosive 45% surge in Virgin Galactic (SPCE) on top of its previous week’s 25% surge. It appears that key test flights are forthcoming as well as more space mania and space ETFs.

The market is down today with the Dow falling 400 points so far. It might get uglier before the day is over.

Intel’s recently publicized struggles with its own chip production highlight the trajectory of this story. The company has been unable to successfully transition to leading-edge manufacturing technologies, and is seriously considering outsourcing to companies like Taiwan Semiconductor. Intel has long been the industry’s torch-bearer in chip self-reliance – with a strong aversion to using third party producers – so its change in mindset is a watershed event.

As I mentioned last week, the stock market is off to a great start with the S&P 500 at an all-time high. However, it’s important to remember that usually the market is choppy in February and March in the first year of a new party in the White House as shown below.

This week we had two companies reporting earnings, one reports next week, and the earnings deluge starts the following week with at least seven companies reporting.

This closeout retailer beat earnings estimates by $0.10 last quarter. The shares have a current annual dividend yield of 2.16%, paid quarterly.

The GameStop Affair last week offered great entertainment for those of us neither long nor short the stock, but in the end what does it mean? In my opinion, the market worked; I don’t see any real problems revealed (aside from naivety of many of the individuals). But I do think the spotlight on the power of individuals vs. professionals is likely to bring some legal outcome that will further empower individual investors, especially given today’s Democratic control of Washington.

The shares of this Real Estate Investment Trust were just upgraded to ‘Strong Buy’ at Raymond James and TD Securities to ‘Buy’. The shares have a current annual dividend yield of 3.02%, paid quarterly.

The top five holdings of this mutual fund are: UnitedHealth Group Inc (UNH, 5.85% of assets), Pfizer Inc (PFE, 5.52%), AstraZeneca PLC (AZN.L, 5.36%), Bristol-Myers Squibb Company (BMY, 4.23%), and Novartis AG (NOVN, 3.57%).

Profit of this rent-to-own company doubled last quarter, yet the shares look pretty undervalued. The company has a current annual dividend yield of 2.82%, paid quarterly.

It’s hard to say if this round of fun with Virgin Galactic (SPCE) is beginning to unwind or if the stock will be up 20% tomorrow (to pick a random number). However, judging by the action in many of the most speculative short squeeze stocks today (GME, NOK, AMC, etc.) there appears to be significant unloading today.

This commercial property Real Estate Investment Trust has a current annual dividend yield of 5.56%, paid monthly.

In recent days, several stocks recommended by Cabot analysts have rocketed to new highs, propelled by the twin forces of social media and short-covering, and our Virgin Galactic (SPCE) is one of them.

The market has been searching for direction this week and we’ve seen an uptick in “the crazy.” If you don’t know what I mean just Google “Short Squeeze GME” and read about the likely collective impact of retail investors teaming up on some stocks to put pressure on those with significant short interest.

From a top-down perspective, the market and our trend-following indicators are in fine shape, but we’re now seeing some big-picture yellow flags (tons of speculative activity) and, more important, growth stocks are beginning to look iffy. We’re not selling wholesale, but we do have a few tweaks today:

This auto parts supplier is expected to announce earnings on February 10, with EPS estimated at $5.08 per share, on revenues of $2.77 billion.

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.