Calling market tops is impossible, but leaning against the wind is something you learn after a while, if you pay attention. So today, with many of our stocks once again hitting or near new highs, I’m leaning into the wind by selling one and downgrading another to hold.

As for new buying, today’s recommendation comes straight from Cabot Top Ten Trader. It’s an underappreciated retail stock that surged higher on a great earnings report two weeks ago and has since pulled back to what I think is a great entry point.

Current Market Outlook


We have a few main thoughts when it comes to the market. First, of course, the intermediate-term trend remains up, and most stocks are acting well, thus we continue to advise a bullish stance. Second, though, divergent action is still in evidence, with small caps and growth stocks racing up the charts, while many sectors and indexes (the NYSE Composite is down 1% this year!) are stuck in the mud. And third, we’ve seen a bit of froth emerge, with some IPOs and other growth names going vertical, whether it’s on news or not. Like we said, we remain bullish—it’s hard not to be when the leading indexes (Nasdaq, S&P 600 SmallCap) and stocks are acting well. That said, given some of the froth we see out there, be sure to keep your feet on the ground, looking for decent entry points and taking some partial profits on the way up.

This week’s list is chock-full of rapidly growing companies with super-strong charts. Our Top Pick is Nutanix (NTNX), which blasted off in March and, after months of up-and-down action, looks to be resuming its uptrend here.

Stock Name	Price	Buy Range	Loss Limit
Canada Goose Holdings (GOOS)	46.21	60-64	53-56
Dropbox (DBX)	31.80	39-41	33-34
Etsy (ETSY)	112.97	40-43	35-36.5
Exact Sciences (EXAS)	116.91	65-69	58-61
HealthEquity, Inc. (HQY)	70.70	77-80	70-72
HubSpot (HUBS)	582.89	135-140	123-126
Inogen (INGN)	210.84	182-189	165-170
Nutanix (NTNX)	55.91	61-64	54.5-56.5
RH Inc. (RH)	252.93	148-156	123-130
Twilio (TWLO)	183.39	57-60	50-52

The market continues its good news/bad news behavior, with emerging market stocks as a whole not doing well but Chinese stocks performing strongly. So, while we don’t have a formal Buy signal, we’re taking advantage of Chinese strength to inch a little deeper into the market. Today’s featured stock is another old friend that we’ve made money on before that has broken out of a nice consolidation pattern.

We have a great variety of sectors and companies for your review this month, beginning with our Spotlight Stock, a Real Estate Investment Trust, paying a high yield, that operates in non-urban locales—a pretty rare find, indeed—as most REITs concentrate their holdings in large cities.

Today I’m leaning back toward the low-risk end of the spectrum with a recommendation of a stock that is a potential takeover candidate; I think you’ll like the story.

Current Market Outlook


The major indexes and (to a greater extent) leading stocks hit a pothole late last week, but while we see smatterings of abnormal action here and there, the vast majority of stocks are simply undergoing normal rests after what’s been a solid five weeks. Of course, this week has plenty of events on the schedule, including the Singapore Summit Tuesday and the Fed’s likely interest rate hike (and accompanying statement) on Wednesday, both of which could result in some news-driven moves. But we’re just going with the evidence today; the trends of the market and most stocks are up, so we advise sticking with a bullish stance.

As for this week’s list, it’s interesting in that we see a handful of turnaround-type plays that were left for dead until a few weeks ago. A good example is our Top Pick this week: Twitter (TWTR), which just emerged from its first proper launching pad since coming public.

Stock Name	Price	Buy Range	Loss Limit
Advanced Micro Devices (AMD)	82.24	14.2-15.5	12.5-13.2
Coupa Software (COUP)	262.20	57-60	51-53
G-III Apparel (GIII)	45.25	45.5-48.5	41.5-43.5
Kohl’s (KSS)	70.62	74-77.5	67-69.5
Momo Inc. (MOMO)	44.65	49-52	43-45
MongoDB (MDB)	156.56	49-52	43.5-46
Peabody Energy Corporation (BTU)	43.32	44.5-46	40.5-41.5
PTC Therapeutics (PTCT)	0.00	35-37.5	31-32.5
Twitter (TWTR)	40.37	39-41	35.5-36.5
Williams-Sonoma (WSM)	64.96	59-61.5	54.5-56

Wide swaths of the market are still in no man’s land, including a handful of major indexes. But the growth areas of the market are looking great, with individual stocks, the Nasdaq and small-cap indexes hitting new highs.

Bottom line, while the picture isn’t perfect, there’s no question the evidence has improved enough to continue extending our line. In the Model Portfolio, we’re adding one familiar name tonight, bringing our cash position down to 20%, and are looking at more potential buys in the days ahead.

In addition to reviewing all our stocks, in tonight’s issue we also talk a bit about surviving shakeouts, something that has been (and will likely continue to) be key as the bull market progresses.

The introduction features a few international trade issues, including disputes about international court systems within NAFTA and CETA, and a potential sunset clause in NAFTA. I’d go on to itemize which steel companies might benefit or be harmed by the latest round of steel tariffs, but I frankly believe that last week’s newest steel tariffs are simply a temporary negotiating ploy pertaining to NAFTA. Therefore, I thought it might be more useful to discuss what’s currently happening with NAFTA negotiations.

[Note: The Cabot Turnaround Letter weekly update won’t be published next Friday, June 19, due to the market being closed for the Juneteenth holiday.]

Before we get into the main topic for today’s newsletter update, a quick note on the portfolio is in order. I’m continuing our “spring cleaning” effort that we began last week by trimming a couple more of our holdings, but I’m also adding a new position to take the place of the recent deletions.

After two near-record-setting months, stocks are encountering their first real turbulence since March. It’s no surprise.

While stocks go up an average of 10% a year, they rarely do so in a straight line. And after the S&P 500 rallied nearly 20% in April and May and the Nasdaq shot up nearly 30%, a pullback of some kind – or possibly even a true correction – was to be expected. It seems it’s happening all at once.

Stocks look set to enter the summer near all-time highs, but leadership has narrowed, volatility has ticked up, and there’s been renewed scrutiny on the AI trade and valuation concerns in some of the market’s biggest winners.

At the same time, the macro backdrop remains a mix of resilience and intermittent turbulence. While economic data continues to hold up, energy prices remain elevated due to the ongoing Iran conflict – which has no end in sight – keeping upward pressure on inflation and yields.

Tech, commodity, AI, and Explorer stocks struggled this week as concern over capital expenditures increased. Mideast tensions intensified and inflation numbers came in yesterday at their highest rate in over three years, fueled by rising energy costs. The combination of anticipated higher interest rates and rising bond yields impacted the price of precious metals, with gold sliding below $4,200 an ounce and silver falling below $64 an ounce.

Stocks look to enter summer near all-time highs, but leadership has narrowed and volatility has ticked up thanks to renewed scrutiny on the AI trade and open-ended questions about valuations in some of the hottest areas of the market.

There’s also been more focus on the evolving macro landscape, which features a resilient U.S. economy but stubbornly high energy prices due to the ongoing Iran conflict, and somewhat elevated yields. We’re now looking at a higher likelihood of a Fed rate hike, with the odds of a hike by December now well over 50%.

The high-flying AI stocks got crushed on Friday. But those stocks started this week higher. Where do we go from here?

The technology-heavy Nasdaq index fell 4% on Friday, and the S&P 500 fell for the week for the first time in 10 weeks. A couple of things spooked investors. The AI trade turned sour after Broadcom (AVGO) reported earnings that included slightly lower revenue projections for its AI chips than were expected. Also, a blowout jobs report strengthened the case for a Fed rate hike by the end of the year.

A major economic narrative that took shape in recent years was the decline and (presumptive) inevitable death of the so-called “petrodollar,” as a growing number of countries diversified their foreign exchange reserves away from the U.S. dollar and toward gold and alternative currencies like the Chinese yuan.

WHAT TO DO NOW: The overall market remains in good shape, though we are seeing some exuberance on the upside and also a few leaders begin to act sloppy. Near term, then, it’s still a coin flip as to what comes, but the vast majority of intermediate-term evidence remains bullish. In the Model Portfolio, we took partial profits in Marvell (MRVL) earlier this week; tonight, we’re buying a half-sized position (5% of the account) in Bloom Energy (BE), which is extremely volatile but also strong and coming off a few weeks of rest. Our cash position will now be around 28%.

This market just keeps going higher.

Sure, there’s uncertainty out there. The war isn’t over. Inflation and interest rates are still too high. But stocks didn’t get the memo. After a strong April, the S&P 500 rose 5% and the Nasdaq soared 8% in May. The indexes are up 20% and 30%, respectively, since March 30 and are continuing to make new highs this week.

Despite the negative headlines and volatility, stocks just keep going.

After a strong April, the S&P 500 rose 5% and the Nasdaq soared 8% in May. The indexes are up 20% and 30%, respectively, since March 30. It’s also worth noting that despite the ongoing Iran war, the price per barrel of West Texas Intermediate crude oil closed down 17% for the month of May.

This week’s Memorial Day observance marked the traditional onset of the summer vacation season for millions of Americans. It’s a time of traveling, sightseeing, picnics and parties. It’s also the peak season for enjoying cold, carbonated beverages like soda pop and energy drinks.

With this dynamic in play, I think it’s time that we give some attention to our holding in PepsiCo (PEP), which is entering a critical period of its sales year.

On the heels of a miserable March and a euphoric April, I wrote several weeks ago in this space that I thought May would determine which direction the market is truly headed, at least in the intermediate term. We have our answer, and it’s a definitive “up.”

All three major U.S. indexes are touching record highs as of this writing, with the S&P 500 up 4.3% in May, the Nasdaq up 7%, and the slower-moving Dow Jones Industrial inching higher by 1.6%. That’s despite the ongoing Iran war and the accompanying sky-high oil and gas prices, escalating inflation, bond yields at multi-year highs, possible Fed rate hikes later this year, and record-low consumer sentiment.

Updates on four of our holdings, including one rating change.

Eight analysts have increased their forecasts for this year and next for this Chinese quick-service company.

Chipotle Mexican Grill (CMG) reported outstanding first-quarter results yesterday afternoon, with revenue of $1.07 billion vs. the consensus estimate of $1.05 billion. But it was the huge and unexpected earnings beat that brought lots of attention to the stock.

Wall Street analysts are forecasting a $41/share target price for this biotech—107% higher than the stock is currently trading.

The strength of the past couple of days has turned our Cabot Tides bullish, where it joins the Cabot Trend Lines and Two-Second Indicator. Thus, after a seven-week rest, it appears the market’s major uptrend is resuming and we want to put some new cash to work.

Updates on two of our stocks that reported earnings, plus updates on six other holdings.

This entertainment giant just hit 100 million subscribers. The company beat estimates by $0.03 last quarter and is on target for triple-digit growth this year.

Last week, a shoddy take-down article was written about one of our holdings on Seeking Alpha. It was written by an anonymous author, was poorly constructed and failed to undermine (in my opinion) the most important parts of the long-case for the company.

The broad market finally firmed up last week. After closing below their 50-day lines the previous Friday, the Dow, S&P 500 and Nasdaq all found support early last week, then rebounded strongly at the end of the week. However, while the market is firming, four of our holdings stumbled on earnings last week.

This is a small cap company with double-digit growth rates. It operates in the booming battery sector.

Mattel (MAT) reported a poor first quarter, largely due to continuing overhang from a poor holiday season.

This stock reported earnings that met estimates this morning, but revenue fell short of expectations and the stock is about 3% lower mid-morning.

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.