The market was relatively quiet today, with the Dow down 28 points and the Nasdaq down 19 as investors looked for news and rumors about the G20 economic summit this weekend.
The action of the past month represented a solid bottoming attempt by the market, and yesterday’s huge up day pushed most major indexes above their shorter-term moving averages. And today, because the markets held their gains, our Cabot Tides has flashed a buy signal, telling us the intermediate-term trend is turning up.
The buy signal is a sign to begin putting money back to work, but given that our longer-term Cabot Trend Lines are still negative and very few stocks are near new high ground, we advise starting slow. If the rally gains steam, we’ll steadily extend our line, but should the rally falter, we’ll quickly step back.
Tonight, though, we’re going to add two stocks to the Model Portfolio. The first is Twilio (TWLO), whose communications platform is very pervasive and is leading to accelerating revenue growth and surging earnings. The stock has been very strong recently and looks like a leading glamor name.
Our second addition is Exact Sciences (EXAS), maker of the potentially revolutionary Cologuard test for colorectal cancer. The stock has some resistance to chew through, but the relative performance line has hit a new peak and we think the next big move is up.
Given the extreme volatility of the market and these stocks in recent weeks you can consider starting with smaller-than-normal position sizes. But we’ll just keep it simple and put 10% of the portfolio into each stock tomorrow.
This will give us three stocks in the Model Portfolio and a cash position of around 70%—still a cautious approach overall, but we’ll be looking to do more buying if the rally gathers steam. Exact Sciences, Five Below and Twilio are rated BUY.