The market continues to make positive strides in terms of both the indexes and the broad market.
While not tearing to the upside, the major indexes have continued to chew into the well-known resistance areas that have capped the market for the past year and a half. And the broad market remains in great health—not only are there hardly any stocks hitting new lows (historically, this correlates with higher prices down the road), but small- and mid-cap indexes are the strongest out there.
All in all, not much has changed with the market’s overall picture—the trends are mostly up and the broad market is healthy. Plus more stocks are acting well (though it’s not overwhelming—see below). So we’re likely to keep the Market Monitor in bullish territory come Monday’s issue.
That said, we’re still not advising a fully bullish posture, mostly because we respect the resistance levels, and getting through them could prove tricky. In fact, after nearly three weeks without any significant down days, a shakeout or pullback on some bad news wouldn’t surprise us at all.
And we’d still like to see more growth stocks perk up to new highs. Since last week’s poor jobs report, some money has flowed back into the yield sectors (on Thursday, the 10-year Treasury yield tagged its lowest level since February). That’s not a negative, per se, but more participating growth stocks would certainly be encouraging.
Still, putting the evidence together, we remain bullish and optimistic that higher prices are coming down the road, though short-term, the possibility of some shaking and baking has increased after three good weeks.
One last piece of advice before we get into the stocks: Don’t forget to book some partial profits if you own a stock that’s spiked higher for a couple of weeks and handed you a solid profit (some energy stocks and REITs come to mind). Yes, we’re bullish, but we like the idea of selling a little into strength and holding the rest for what we hope will turn into a longer-term gain.
Buy Ideas
It’s not the most thrilling story, but Berry Plastics (BERY 39) has solid earnings estimates (up 26% this year and up 19% next year), has shown outstanding price-volume action in recent weeks—breaking out to new highs on strong volume over eight straight days—and has consolidated quietly for a month as its 25-day moving average catches up. We think it’s buyable here with a stop in the 36 to 36.5 range.
Ebix (EBIX 49) has etched a tight seven-week base and looks like it’s ready for the next leg up in the stair-step advance it began in late February. We’re OK buying some here with a stop just below the 50-day line, around 44.5.
HD Supply (HDS 36) set up a nice six-week base, which was part of a much larger 11-month correction and consolidation. HDS reacted well to earnings this week, leaping above near-term resistance. With the 50-day line at 34, you can buy some around here with a stop just below that line, making for a good risk-reward situation.
Salesforce.com (CRM 83) has gone very quiet in recent days. Coming on the heels of an earnings-induced move to new highs last month, it’s constructive action. You can buy some around here and use a stop around 77.
Weibo (WB 28) isn’t at an ideal entry point, but there’s no question the stock is under extreme accumulation, with a huge volume expansion since its breakout in early April. We think dips to 27 or below would be tempting for a small (half-sized) position with a loose stop near 23.5. Or if the stock can consolidate for a few more days, it could offer up a lower-risk entry.
Wynn Resorts (WYNN 101)
tried to hit new recovery highs (briefly rising out of an eight-week base), though volume was light and the stock has since pulled back a bit. Still, we like the stock’s overall pattern—we’re OK with a half-sized position around here with a stop near 93, and buying more on any decisive push above 104 or so.
Sell Ideas
Besides booking partial profits (which we mentioned above), we have just one sell today—we think the action in New Oriental Education (EDU 39) is abnormal—the stock fell back to its mid-April levels on Wednesday on huge volume and has been unable to bounce. We think it’s best to sell.
The same goes for its peer TAL Education (XRS 53), which tripped our stop. Sell.
We continue to have many tight stops in place should the market (or specific sectors) roll over in the days ahead:
Acuity Brands (AYI 258) near 247
Agnico Eagle Mines (AEM 51) near 43
Amedisys (AMED 53) near 50
AMN Healthcare (AHS 41) near 36.5
Banc of California (BANC 20) near 19
Barrick Gold (ABX 20) near 16.5
Broadcom (AVGO 164) near 151
Buffalo Pet Products (BUFF 25) near 24.5
Credicorp (BAP 155) near 138
Crescent Point Energy (CPG 18) near 16
Cynosure (CYNO 52) near 47
CyrusOne (CONE 53) near 46.5
Diamondback Energy (FANG 92) near 85
EBIX Inc. (EBIX 49) near 45
Facebook (FB 119) near 110
Huntsman (HUN 16) near 14.5
Ligand Pharmaceuticals (LGND 115) near 113.5
MasTec (MTZ 24) near 22
National Storage (NSA 21) near 20
Newmont Mining (NEM 36) near 31
Nvidia (NVDA 47) near 41
Pioneer Natural Resources (PXD 164) near 155
Reliance Steel (RS 76) near 71.5
Sabre (SABR 29) near 27
Silver Wheaton (SLW 21) near 19
Steel Dynamics (STLD 26) near 24
Tallgrass Energy (TEP 47) near 43
Texas Roadhouse (TXRH 47) near 43
Weibo (WB 28) near 24.5
Wynn Resorts (WYNN 101) near 93
As always, don’t hesitate to email me (mike@cabot.net) with any questions or comments on these or other Top Ten stocks.