Movers & Shakers Update March 11, 2016
Michael Cintolo, Chief Analyst
Email: Mike@cabot.net
Follow me on Twitter: @MikeCintolo
The major indexes have all been dithering sideways most of the week, but aren’t giving back any of their gains, either. The S&P is nudging right up under its 200-day moving average, and the Dow has actually gotten a nose above it. But the Nasdaq is still well off that mark.
The percentage of stocks on the NYSE above their 200-day moving averages has improved to 36.5%, which is positive. On the other hand, a truly healthy market will have more than 50% on top of their long-term averages.
The number of stocks on the NYSE hitting new 52-week lows has dried up to below 40 for almost two weeks, which is healthy. (The new-lows number is more important as a topping indicator, but it’s a welcome confirmation of general improvement in market tone.)
What we’re really waiting for before we hit the accelerator is to get a new wave of great growth stocks breaking out of sound bases. There have been a few, and we have seen some excellent moves following earnings, with stocks holding their gains.
Our strategy right now hasn’t changed. If you have a ton of money still on the sidelines, you should be doing some selective buying. And if your buys make money (up 5% to 10%), you can increase your buying. This will keep you in sync with the market and let it pull you toward heavier investments.
The converse also applies, of course, and if the rally stalls and your stocks don’t deliver those gains, you should regroup and rethink. We will keep you apprised of what’s happening.
BUY IDEAS
Agnico Eagle Mines (AEM 36)
powered higher in early February on big volume, and has spent more than four weeks digesting those gains. The rising 25-day MA is catching up and may provide the energy for a breakout above 36, which would be buyable with a stop at 33. Barrick Gold (ABX 14) and Goldcorp (GG 16) are hanging around their new highs, with GG having bounced back from a February 26 gap down. If you’re interested in gold, either one looks good here. Be sure to trail a stop, as volatility can be high.
Newmont Mining (NEM 27) closed at a new high yesterday after spending a month consolidating its gains in the 25 region, so a new upleg is likely getting underway.
Domino’s Pizza (DPZ 133) has traded flat as a pancake since its huge February 25 gap up, not giving up an inch of its gains. If you see a breakout above 135, you can take a small position and average up if it works.
Five Below (FIVE 39) has started to build a launching pad between 38 and 39 following its February rally. This is a strong story, and taking a small position near 38 would represent a good risk/reward proposition. A tight stop at 36 (resistance in October and early February) is a good idea.
Paypal (PYPL 39), like its competitor Square (SQ 11), is very attractive to us on a fundamental basis as the post-credit card era develops, and the normal retracement of the stock over the past week provides a decent entry point.
SolarEdge (SEDG 28) has done nothing wrong since our January recommendation--it’s simply been building a base--and the odds are that this base will eventually lead to a new leg up. The pullback of the past week provides a nice entry point.
Texas Roadhouse (TXRH 42) has been holding up quite well since its blowout earnings report two weeks ago brought a high-volume surge higher. If you haven’t bought yet, you can start to establish a position here.
Vail Resorts (MTN 131) released a quarterly report that beat estimates on Thursday, yet the stock traded lower by the end of the day as investors incorporated the company’s spending projections in their valuation models. Technically, we like the sharp, news-driven pullback, and see a buying opportunity here.
Wayfair (W 44), recommended on Monday, retreated on modest volume all week and can be bought comfortably here.
SELL IDEAS
There is just one absolute sell this week, but a few positions look ripe for a little profit taking and there are some that have shown unusual weakness that need careful watching.
Cree (CREE 30) took a tumble on Monday and tripped its stop. It should be sold.
Mellanox (MLNX 50) has put in six straight down days. A pullback isn’t unusual for a stock that has just pushed out to new multi-month highs, but you should keep an eye on it. The original loss limit at 46 is still valid.
Nasdaq (NDAQ 66) has had a good run over the past month, so if you’d feel good taking a short-term profit, be my guest. A pullback to the 62 level would not be unusual.
Children’s Place (PLCE 68) has had a good four-week run, so if you bought on our original recommendation, you might want to take some profits off the table here.
Take Two Interactive (TTWO 36) gapped down on Monday on average volume and has only bounced feebly since. In a weaker stock, such action might be grounds for dismissal, but given that TTWO hit a new high just last week, we’ll be a little more patient.
And we’ve adjusted one stop this week:
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
Diamondback Energy (FANG 73) near 66.5
Edwards Lifesciences (EW 87) near 82
Five Below (FIVE 38) near 36
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.