Movers & Shakers Update March 4, 2016
Michael Cintolo, Chief Analyst
Email: Mike@cabot.net
Follow me on Twitter: @MikeCintolo
With the major indexes working on their third straight week in the black, the intermediate-term trend remains up—so we believe you can slowly put money to work as stocks show you attractive entry points. Happily, many Top Ten stocks have acted well during the past couple of weeks.
That said, we’re still sticking with our neutral-ish overall stance—while the major indexes are well above their rising 25-day moving averages (which keeps the intermediate-term trend up), all are still meaningfully below both their longer-term moving averages (the 35-week lines are near 2,006 and 4,850 for the S&P 500 and Nasdaq, respectively), and we want to see both of those indexes above those levels for a couple of weeks before calling the longer-term trend positive.
We’re not throwing cold water on the rally so far. While the number of stocks hitting new highs has been relatively sparse (just 37 on the entire Nasdaq during Tuesday’s thrust higher), most sectors have lifted nicely, especially the in-the-dumps groups that were decimated during the past few months, leading to a nice drop-off in the number of stocks hitting new lows. And we’ve seen some stocks perform very well, too, offering some buying opportunities.
The game plan remains the same—if you were heavily defensive for the past two months, now’s a time to do a little buying. If you develop some profits (not just 1% or 2%, but maybe 5% to 10% in a stock), you can both bump up your loss limit (thus cutting down your risk of loss) and snap up another stock or two.
This way the market will “pull” you into a more heavily invested position if you start making money, and presumably, as the rally gains steam. If the rally stalls out, of course, you won’t end up putting much money to work because your stocks will likely do the same.
Overall, then, you should remain somewhat neutral but continue to look for low-risk entries on new potential leading stocks. If more emerge, the odds that the rally will gain steam increases.
Buy Ideas
Some REITs have been hit, but CyrusOne (CONE 40) is acting great, with the stock spiking to new highs on good volume in recent days. It’s not very volatile, so you could buy some around here or (preferably) on dips toward 39, with a stop near 36.5.
Ellie Mae (ELLI 84)
enjoyed a super-powerful rally following earnings in mid-February, taking the stock decisively to new highs. It’s begun to consolidate since, though it hasn’t pulled back much. Still, we think you should keep an eye on it—a dip to 80 or so would be tempting, while keeping a stop down around 73.
Five Below (FIVE 38)
spiked off its 50-day line when the market bottomed in early February, rallied to resistance near 40 and has begun to back off a bit. There’s still some resistance to chew through, and FIVE is likely to report earnings within a couple of weeks. Still, we like the story and the developing set-up. You could nibble here if you don’t own any, and look to buy on any earnings-induced lift-off above 40 in the weeks ahead.
Randgold Resources (GOLD 94) is similar to ELLI—a huge, powerful thrust to new highs for a few weeks, and now the stock has begun to pull back a bit, though it’s not quite in a low-risk buy range. A dip into the mid-80s (near the rising 25-day moving average), though, would be enticing, with a stop near 76.
SolarEdge (SEDG 28)
has come close to stopping us out a couple of times, but held support above 22 and has now etched a solid two-month base. And, more important, the stock surged on huge volume this week after one publication said it would likely be the #1 inverter supplier to the residential market this year. We’re OK with a small buy here and a stop near 24, with the idea of buying more if it lifts above 30.5.
Vail Resorts (MTN 129)
has rounded out a two-month-plus base and has chopped around south of 130 for the past week or so. A few more days of consolidation, followed by a push above 132, would be bullish. If you buy, you can use a tight stop near 123.
It’s a similar story with Vantiv (VNTV 52), which rallied just above its old high in recent days before pulling back a bit. Another few days in this area, followed by a push above 54, would be highly bullish. If you buy here (or on the breakout), use a stop near 49.
Sell Ideas
While it feels good to finally have a few stocks head higher, don’t forget to book some partial profits if you get them. Michael Kors (KORS 57) is one example—shares are up 15% to 20% since our recommendation less than four weeks ago, so you could sell one-third of your shares to book some profits, and then hold the rest with a trailing stop, hoping for a home run on the remaining position.
Another option would be Wynn Resorts (WYNN 86), which has popped more than 10% in just a few days. By taking a little off the table, you’ll not only book some profit but it will give you a cushion to allow the rest plenty of room to breathe. Both KORS and WYNN look great, so be sure to hold onto most of your shares if you do sell some.
Other than some things like that, we have no outright sells this week, though we have bumped up a few stops. Here’s our latest list:
Agnico Eagle Mines (AEM 36) near 30.5
Burlington Stores (BURL 54) near 51
Cirrus Logic (CRUS 36) near 32
Coherent (COHR 85) near 74
Cree (CREE 31) near 28.5
Diamondback Energy (FANG 73) near 66.5
Edwards Lifesciences (EW 87) near 82
Five Below (FIVE 38) near 34.5
Goldcorp (GG 16) near 13.5
Mattel (MAT 33) near 29
Nasdaq (NDAQ 64) near 60
National Storage (NSA 19) near 16
Rovi Corp. (ROVI 23) near 18.5
Seaspan (SSW 18) near 16
SolarEdge (SEDG 28) near 24
STORE Capital (STOR 24) near 23.5
Take-Two Interactive (TTWO 36) near 34
TAL Education (XRS 50) near 46
The Children’s Place (PLCE 70) near 62.5
Universal Display (OLED 49) near 44
As always, don’t hesitate to email me (mike@cabot.net) with any questions or comments on these or other Top Ten stocks.