The market\'s rally in recent days has turned our Cabot Tides positive, joining our Cabot Trend Lines and Two-Second Indicator. Because of that, we did some buying in a Special Bulletin last evening, but added half-sized positions because both companies are set to report earnings next week.

In today’s issue, we add a large-cap industrial stock to the Dividend Growth Tier, review our sales from the past week, and explain how to write covered calls.

In choosing today’s stock, I deliberately looked for one that was not hitting new highs, a stock with limited downside. And what I found was a stock that came public recently—to great fanfare—but that has since cooled off and settled down to what I believe is a buyable bottom.

Current Market Outlook


A week ago at this time, all the major indexes had just broken below their 50-day moving averages, key sectors were lagging and hardly any stocks were heading consistently higher. But since then, the market has acted very well, capped by today’s French election-induced move higher; it’s looking more and more like the prior dip could have been the final, news-driven shakeout (North Korea fears) to the market’s seven-week consolidation. That said, we don’t want to get carried away—while the Nasdaq hit new highs today, other indexes haven’t yet, and we’re still smack dab in the middle earnings season, which will have a lot to say about the market’s near-term fate. All told, we’re bumping our Market Monitor back up to a level 7 and will look to raise it further if the market holds (or builds) on its gains in the days ahead.

This week’s list is heavy on growth ideas, which is good to see given the market’s recent struggles. For our Top Pick, we’ll go with a strengthening liquid leader—Alibaba (BABA) looks ready to challenge all-time highs, though with earnings likely out in a couple of weeks, keep new positions small.

Stock Name	Price	Buy Range	Loss Limit
Activision Blizzard, Inc. (ATVI)	0.00	49-51	45-46
Alibaba (BABA)	254.81	106-112	90-100
Autodesk (ADSK)	229.00	87.5-90	82-84
Chipotle Mexican Grill (CMG)	773.32	455-475	420-430
Cotiviti (COTV)	0.00	40-42	36.5-38
Dycom Industries (DY)	0.00	102-106	94-96
IAC/InterActiveCorp (IAC)	0.00	74-78	69-71
Intuitive Surgical, Inc. (ISRG)	0.00	780-815	735-745
Momo Inc. (MOMO)	44.65	36-38	32-33
Ollie’s Bargain Outlet (OLLI)	103.94	35-37	31.5-32.5

Most of our recommended stocks are acting great, and our new recommendation checks many of the boxes we look for when hunting for a long-term winner. It is a dominant restaurant company in China, and the stock just got going after a few months of base-building.

After surging to new highs in mid-March, today’s recommendation entered into a tight consolidation pattern—and today it’s still in that pattern! While the broad market has pulled back, this stock has held up strongly, which is a very good sign.

Current Market Outlook


Last week saw all the major indexes close clearly below their 50-day moving averages, a development which, combined with another batch of breakdowns among leading stocks and cracks in key sectors (like chip stocks), has us taking another couple of steps back—we’re moving our Market Monitor down to a level 5 (out of 10) in today’s issue. To be clear, the market isn’t a disaster here, as most major indexes are just 3% or 4% from all-time highs, many stocks (especially growth stocks) are still relatively resilient and the longer-term uptrend isn’t in doubt. But the onus is on the bulls to take a stand. After six weeks of correcting and consolidating, we need to see buyers step up before putting a bunch of new money to work. In the meantime, we’re holding some cash and keeping new buys small.

Encouragingly, our screens are still picking up on plenty of attractive charts and stories. Our Top Pick is Innoviva (INVA), which has a couple of asthma treatments that are raking in the dough (much of it from royalties). It’s thinly traded, so consider buying a small position on dips.

Stock Name	Price	Buy Range	Loss Limit
Align Technology (ALGN)	316.20	111-114	102-104
Arista Networks (ANET)	0.00	129-133	119-121
Bioverativ (BIVV)	0.00	54-57	49.5-51
HP (HPQ)	0.00	17.7-18.2	16.7-17
Innoviva (INVA)	0.00	13.5-14.2	12.5-12.8
JD.com (JD)	39.58	31.5-32.5	29.5-30
MACOM Technology Solutions (MTSI)	0.00	49-51	46-47
PulteGroup (PHM)	45.93	23.4-24.4	22-22.5
Seagate Technology (STX)	0.00	46.5-49	43-45.5
Yum China (YUMC)	0.00	31.5-33	29-30

This month’s Cabot Enterprising Model contains 16 companies that offer you a mix of low- and moderate-risk stocks to add to your portfolio. In the issue, I feature five stocks, including one new stock that holds great promise.

WHAT TO DO NOW: Big picture, the market and most leaders look great, and our market timing indicators are in fine shape. Near-term, though, there’s little doubt things have gotten a bit giddy, with many names and indexes extended to the upside. Tonight, we’re placing Cava (CAVA) on Hold as that stock has been caught up in some group weakness; we’ll hold our 45% cash position for now, but stay tuned, as we’d like to add some new names (or add to existing names) in the near future.

What a difference a month can make! What an April! The S&P rose 9.6% in April, making it the best single month for the market in six years. It hit an all-time high on Friday.

Sure, the war isn’t over. But the market doesn’t really seem to regard it as a war anymore, more like a blockade situation with the possibility of some skirmishes. While there is still headline risk, investors have moved beyond this war and are focusing on earnings. And for good reasons.

The results are in for the month of April. It was fabulous. The S&P rose 9.6%, making it the best single month for the market in six years. It hit an all-time high on Friday.

Sure, the war isn’t over. But the market doesn’t really seem to regard it as a war anymore, more like a blockade situation with the possibility of minor skirmishes. While there is still headline risk, investors have moved beyond this war and are focusing on earnings.

Now before you call me crazy concerning today’s newsletter headline, hear me out.

Even though large-cap names have garnered more than a fair share of attention among investors this year, I think a case can be made that companies with big capitalizations have a lot more room to run higher before they can be truly regarded as “overbought” or “played out.”

The market is digesting the push and pull of higher oil prices, a deeply divided Federal Reserve, prospects for a prolonged blockade of the Strait of Hormuz and fading momentum from the AI trade that helped push markets to all‑time highs earlier this month.

Despite the crosscurrents, the overall tone still tilts bullish, supported by investor comfort (for the time being) with the geopolitical tension, resilience in the U.S. economy, and improving visibility into earnings growth over the coming quarters.

Yesterday, four tech giants, Alphabet, Amazon, Meta and Microsoft, representing 22% of the S&P 500’s market value, reported strong quarterly earnings that highlighted the importance of AI.

You might think the above companies and their AI brethren are “asset light” companies but you would be very wrong.

It’s been a glorious April following a miserable March for the market. What happens in May may determine which direction stocks are headed for the rest of the year.

That’s probably overstating things a bit, but May should be crucial for the reasons we discussed last week: namely, the fate of the Iran war, but also the bulk of first-quarter earnings season and the introduction of a new Fed chair.

What war? This market is moving on. We may not be out of the woods yet, but investors are looking beyond the Iran war.

Stocks have already made up all losses from a rough March and then some. The S&P 500 had fallen 7.7% in the month of March by the 30^th. Since then, the index has rallied over 13%. The S&P is now at a higher level than before the war began and is hitting new all-time highs.

The other day I was paid a visit by a roving ISP salesman who was pitching his company’s fledgling internet service over the local monopoly’s. We struck up a conversation and he asked what I did for a living. When I told him, his eyes lit up and he asked, “Got any good stocks you can recommend?”

Without thinking I blurted out, “Anything AI-related. You can’t go wrong.” The advice was only semi-facetious, for there’s undeniably a degree of truth behind it. My instinctive response to that question also prompted me to consider the question: just how long can the broad market continue its “all things AI” run without broader sector participation

Note: I’m out of town this week, so I’ll be a bit briefer on the update today—but I’m still checking my laptop a couple of times a day if you have any questions or comments. I’ll be back at my desk come Monday. Cheers.

WHAT TO DO NOW: Remain optimistic. The market and some leaders have hesitated, but all of our market timing indicators are bullish, and most stocks we own or are watching are working. Last Friday, we bought a half-sized stake in Nebius (NBIS) and added a 3% additional stake in ProShares S&P 500 Fund (SSO); earlier this week, we sold our small remaining position in GE Aerospace (GE); and tonight, we’ll buy a half-sized position (5% of the portfolio ) in Cava (CAVA). We’ll still have 46% in cash or so after these moves.

Despite all the headline noise lately we’re marching deeper into first‑quarter earnings season with the market’s path of least resistance still pointing higher.

Optimism around the extension of the tentative ceasefire in the Middle East has reduced geopolitical anxiety to a seemingly manageable level. The U.S. economy continues to show resilience, and the corporate earnings outlook points toward meaningful growth in the coming quarters and years.

The old saying, “History doesn’t repeat itself, but it rhymes,” is an apt one for the stock market these last two years.

In early 2025, the S&P 500 raced to new all-time highs before peaking in late January/early February, only to get dragged down in March and April by a geopolitical crisis (tariffs/Liberation Day), before rallying in a V-shaped pattern as the severity of the crisis abated.

We’re going to sell our position in Seaspan (SSW), a stock that we’ve had in the portfolio for four full years, enjoying its impressive dividends through many market moves.

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.