Movers & Shakers Update March 25, 2016
Michael Cintolo, Chief Analyst
Email: Mike@cabot.net
Follow me on Twitter: @MikeCintolo
FYI: Our offices are open for most of today despite Good Friday (market is closed). If we don’t hear from you, have a great holiday weekend and we’ll be back with you on Monday with another issue of Cabot Top Ten Trader.
Stocks finally ran into a little resistance this week, with the major indexes slipping most of the last three days of the holiday week. All told, both the S&P 500 and Nasdaq lost about a half percent for the week, the first lower close in six weeks.
The recent retreat wasn’t surprising—the major indexes had just run straight up into some resistance, and some signs of short-term optimism had arisen. And to this point, the dip (which could easily last another few days or more) has been normal and hasn’t changed the overall picture.
Thus, the intermediate-term trend remains clearly up, and the broad market is still in good shape. Moreover, on an individual stock basis, most Top Ten stocks that have retreated have barely given ground.
On the flip side, the longer-term trend of the major indexes remains down, and most growth-oriented stocks are still on their launching pads. Overall, the number of stocks hitting new highs remains very low, especially on the Nasdaq, which has seen an average of just 40 or so new highs each day during the past three weeks.
Going forward, on the bull side, we’ll continue to take our cue mostly from individual stocks—if more stocks break out on the upside, it will be a bullish sign for the market. As for the long-term trend, we’ll need to see the Nasdaq close a couple of straight weeks above 4,820 or so (its 35-week moving average) before declaring the major trend up.
On the downside, there’s plenty of room for the indexes to dip without damaging the intermediate-term uptrend, but we’ll be watching some sectors (especially the financials) for any major breakdowns. And, of course, if a bunch of Top Ten stocks begin to keel over, that would be a yellow flag as well.
For now, though, we’re sticking with our stance—we’re more invested than not, but we still have a good-sized cash position on the sideline. During the past 18 months, we’ve seen many promising market rallies peter out after four or five weeks, so it’s best to wait for more upside confirmation before getting out-and-out bullish.
Buy Ideas
Chip stocks have been acting better and better, and Broadcom (AVGO 153), while not the most dynamic of the group, remains in a persistent advance. A dip toward 150 or a bit below would be tempting, with a stop near 140.
Transportation stocks have also given ground only grudgingly in recent days. C.H. Robinson (CHRW 74) has been gliding steadily higher since the start of February. Any dip toward the rising 25-day line (now nearing 72) would be buyable, with a tight percentage stop around 68.5.
Express (EXPR 21) is holding up very well following a powerful, persistent, high-volume thrust earlier this month. It’s still extended and could rest for another couple of weeks, but we think you could nibble here or, ideally, buy on a retreat toward 20 (with a stop near 18.5). This looks like a handle to a multi-month base formation; if the market eventually heads higher, we expect EXPR to do well.
It’s a similar story with Kate Spade (KATE 24)—it’s had a big, powerful rally from its lows (bolstered by a great reaction to earnings) and a very modest pullback in recent days. With the 25-day line nearing 22.5 and rising quickly, we think further dips are buyable, with a looser percentage stop near 20.5 or so.
Lumentum (LITE 27)
is thinly traded and choppy, but it’s acting very well—after a humongous-volume breakout in early February, the stock had a shakeout to its 50-day line in early March, and has since lifted to new highs without giving up much ground. A small position on dips to 26 or below is one idea, with a stop near 23.5.
Nvidia (NVDA 34)
is another chip stock that’s acting well—the stock broke out from its base a few days ago above 33 on good volume, and it’s pushed higher since. We’re OK with a buy around here or on dips with a stop near 31.
Sabre Corp. (SABR 28)
continued to trade extremely tightly and on low volume. You could nibble here with a tight stop just below 26.5, but we’d wait on any serious buying until we see a big-volume push above 28.5 or so to buy. That way, if the stock fails from there, you’re not taking on much of a loss.
Super Micro Computer (SMCI 33) is another nice-looking set-up—similar to SABR, you could nibble within the base (with a stop near 30.5), but we’re most intrigued with buying on a powerful push above 34 (and using a stop near 31).
Sell Ideas
We have six sells today. The first two, Rovi Corp. (ROVI 20) and SolarEdge (SEDG 24), both tripped their stops.
The other four—Burlington Stores (BURL 54), Take-Two Interactive (TTWO 35), Vail Resorts (MTN 127) and Wayfair (W 40)—all lagged badly during the past few weeks, with some (like W) slicing below support.
Also, if you own CyrusOne (CONE 44) from back in the 36 to 38 range (our original buy range), you can consider booking partial profits here—the stock acts great following a new acquisition, but REITs are a bit obvious here and CONE isn’t a runaway-type stock. You could sell one-third to one-half your shares and hold the rest.
Lastly, here’s our (very) long list of stops—if the market sinks, we’ll be booking some profits in short order, but so far, none of these stocks have broken:
Agnico Eagle Mines (AEM 36) near 33
Barrick Gold (ABX 14) near 12 Cirrus Logic (CRUS 34) near 32.5 Coherent (COHR 89) near 78 Diamondback Energy (FANG 77) near 71 Edwards Lifesciences (EW 87) near 83
First Solar (FSLR 68) near 66 Five Below (FIVE 40) near 36.5 Goldcorp (GG 16) near 14.5
M/A-Com Technology (MTSI 42) near 39 Mattel (MAT 32) near 30.5
MaxLinear (MXL 17) near 16
Mellanox Technologies (MLNX 54) near 48
Motorola Solutions (MSI 73) near 70 Nasdaq (NDAQ 64) near 62 National Storage (NSA 20) near 17.5
Newmont Mining (NEM 25) near 23
O’Reilly Auto (ORLY 275) near 260
PayPal (PYPL 39) near 35
Stamps.com (STMP 108) near 105
STORE Capital (STOR 26) near 24.5 Sturm, Ruger (RGR 70) near 68
Super Micro Computer (SMCI 33) near 30.5
TAL Education (XRS 50) near 47.5 The Children’s Place (PLCE 80) near 69 Universal Display (OLED 52) near 48
Wellcare Health (WCG 92) near 86
As always, don’t hesitate to email me (mike@cabot.net) with any questions or comments on these or other Top Ten stocks.