Movers & Shakers Update March 18, 2016
Michael Cintolo, Chief Analyst
Email: Mike@cabot.net
Follow me on Twitter: @MikeCintolo
Stocks are looking to notch their fifth straight week of gains today, so it’s obvious the evidence continues to improve. We see three main positives when it comes to the market right now.
First, of course, the intermediate-term trend remains up. No doubt about that.
Second, the broad market has, by our measures, turned healthy. We’re seeing great action in the off-the-bottom groups (coal, steel, oil, etc.), and while these areas could easily hit some near-term resistance (many of these areas are extended following the Fed’s dovish tone this week), their bottoming patterns and powerful thrusts higher bode well for the broad market.
And third, there are many growth stocks setting up here. Many have spent the past five weeks rounding out their launching pads, and a bunch have quieted down in recent days, which is usually a sign the stocks are prepping for a breakout.
All of that is good, and it’s caused us to become a bit more constructive toward the market. Our Market Monitor will probably be nudged up a notch or two in Monday’s issue.
However, if this five-week rally is going to morph into a five-month rally, we’re going to have to see a couple of things occur--the longer-term trend must turn positive (basically, the S&P 500 and Nasdaq have to close above their 35-week moving averages for two straight weeks), and the aforementioned growth stocks should break out on powerful volume.
We’re optimistic both of these can happen, but until they do, it’s best to go slow, especially as the major indexes are now banging their heads into resistance. Thus, we’re leaning bullish, but the next week or two should tell us whether the buying pressures are spreading or not.
Buy Ideas
Cirrus Logic (CRUS 36) has etched a nice handle (a low-volume, shallow dip for a week or two that often shakes out the last remaining weak hands during a larger consolidation) during the past two weeks. You could buy a half-sized position here with a tight stop near 33.5, and then look to buy the rest on a decisive push above 37. Or, to be safer, you could just wait for the breakout above 37, using a similar stop.
Domino’s Pizza (DPZ 131) has traded very tightly for the three weeks since its big earnings gap to new highs. Like CRUS, you could start a position here if you don’t own any, and look to average up on a big-volume move above 135 or so.
MaxLinear (MXL 18) is a bit thinly traded, but it leapt above some resistance this week on big volume and has held its gains since. If you don’t own any, you can buy some here with a stop near 16 or a bit above there.
Mellanox Technologies (MLNX 51) is beginning to push toward resistance after a quiet pullback to its 25-day line this month. You could buy a little here with a stop near 47, and then look to buy some more on a big-volume push above 52.5.
PayPal (PYPL 40) ran from below 32 in early February to 40 at the start of the month, and it’s been chopping around in the 37.5 to 40 area since. Should the market pull back a bit next week, a dip toward the 25-day line (now nearing 38) could mark a low-risk entry, with a stop near 35.5.
Sabre Corp. (SABR 27) remains set-up well--we’re looking for a big-volume push above 28.5 or so as the green light. Once again, you could start a position here and look to fill out the rest on a breakout. Just make sure you use a reasonable (8% to 10%) loss limit if you get in early.
We like the stair-step action in TAL Education (XRS 53), including its move to new highs yesterday. The stock looks buyable around here or on dips, with a stop around 47, which is a bit below its 50-day line.
Vantiv (VNTV 51) has also set up a nice multi-month base, and the low-volume dip of the past three weeks looks normal to us. The breakout level here is around 53.5 (big volume required); again, you could nibble here (with a stop around 48), or just wait for the breakout (in which case you can use a stop near 50).
Sell Ideas
We don’t have any outright sells this week, however, we want to remind you to book some partial profits (selling one-quarter to one-third of you shares) in some stocks that have spurted higher and are extended to the upside--right now, that could include various gold stocks, or stocks like National Storage (NSA 20) and The Children’s Place (PLCE 80). The idea is to put some profit in your pocket while the getting is good ... and then hold the rest of your shares with a trailing stop, hoping to hit a home run with that portion of the trade.
Lastly, here’s our updated (and long) list of stops--if the market does dip from here, we’ll likely be tripped out of a few names to preserve our profits. But we’re also allowing most names room to maneuver:
Agnico Eagle Mines (AEM 38) near 32.5
Burlington Stores (BURL 56) near 52
Cirrus Logic (CRUS 36) near 32.5
Coherent (COHR 89) near 76.5
Diamondback Energy (FANG 77) near 69
Edwards Lifesciences (EW 85) near 82
First Solar (FSLR 72) near 66
Five Below (FIVE 40) near 36
Goldcorp (GG 17) near 14.5
Mattel (MAT 33) near 30
Mellanox Technologies (MLNX 51) near 46
Motorola Solutions (MSI 73) near 70
Nasdaq (NDAQ 65) near 61
National Storage (NSA 20) near 17.5
O’Reilly Auto (ORLY 268) near 255
Rovi Corp. (ROVI 22) near 19.5
Super Micro Computer (SMCI 33) near 29.5
SolarEdge (SEDG 27) near 25
Stamps.com (STMP 117) near 104
STORE Capital (STOR 26) near 24
Take-Two Interactive (TTWO 35) near 34
TAL Education (XRS 53) near 47
The Children’s Place (PLCE 80) near 67
Universal Display (OLED 53) near 48
Vail Resorts (MTN 129) near 125
Wellcare Health (WCG 92) near 84
As always, don’t hesitate to email me (mike@cabot.net) with any questions or comments on these or other Top Ten stocks.