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Last week was a good one for the bulls, not because the indexes finished in the green but because after three poor weeks, the broad market finally found some support, with breadth improving and the number of stocks hitting new lows drying up. We wouldn’t say the broad market is completely out of the woods; another few days of positive action would be necessary to conclude that. But, overall, we’re optimistic—the intermediate- and longer-term trends are pointed up, most stocks outside of commodity sectors remain in good shape, and we’re even seeing some rotation into more growth-oriented groups, which is usually a good sign. We’ll keep our Market Monitor at a level 7 right now as we wait to see further confirmation from the broad market.

This week’s list is chock full of strong stocks with solid growth stories from a variety of industries. We’ll keep it simple with our Top Pick this week, going with Adobe Systems (ADBE), a liquid growth leader that just reported a strong quarter.

Stock Name	Price	Buy Range	Loss Limit
Adient (ADNT)	0.00	70-73	64-65
Adobe Inc. (ADBE)	315.23	123-127	116-119
Axalta Coating (AXTA)	0.00	31-32.5	28-29
Broadcom Limited (AVGO)	266.26	215-223	200-205
Children’s Place (PLCE)	0.00	114-117	105-107
Glaukos Corp. (GKOS)	67.84	46-48.5	41.5-43
KB Home (KBH)	36.05	18.5-19.5	17-17.5
Micron Technology, Inc. (MU)	43.31	25-26	23-23.5
Olin Corp. (OLN)	0.00	31-33	29-30
Veeva Systems (VEEV)	180.23	47-50	44-46

Today’s featured stocks include Johnson Controls (JCI), Vertex Pharmaceuticals (VRTX); and a new addition to the Growth & Income Portfolio, TiVo (TIVO).

Today’s recommendation is a case in point. After a long three-year waiting period, the stock broke out to new highs yesterday and followed through today. The stock’s name will probably be familiar to you; its story is certainly interesting.

Current Market Outlook


We’ve begun to see a few worrisome developments when it comes to the market. Small-cap indexes have lagged badly and haven’t made any progress in three months. A few sectors (especially commodity-related) have broken down. And breadth in general has weakened, with the number of stocks hitting 52-week lows expanding in recent days. However, we see a lot of good news, too—the intermediate-term trend is still pointed up, lots of strong stocks have consolidated normally in recent days and we’ve even seen a few new leaders begin to emerge on big volume. Altogether, it’s fair to say that the evidence has weakened so we’re knocking down our Market Monitor back to a level 7 and will be watching events closely. But until the uptrend is cracked, you should remain mostly bullish, holding your strong performers and looking for new buys as opportunities arise.

This week’s list has a wide variety of stocks and sectors, including a few names we haven’t seen in a long time. Our Top Pick is Builders Firstsource (BLDR), a good-sized supplier of building products that just gapped up strongly on earnings after trashing earnings estimates.

Stock Name	Price	Buy Range	Loss Limit
Autohome (ATHM)	98.65	34-36	31-32
Builders FirstSource (BLDR)	44.12	14.5-15.5	13.5-14
Exelixis (EXEL)	27.35	20.5-22	19-19.5
Leucadia (LUK)	0.00	26-27	24-25
ON Semiconductor (ON)	24.07	14.5-15.5	13.5-14
PulteGroup (PHM)	45.93	22.5-23.5	21-21.5
Shopify (SHOP)	585.00	60-64	53-55
SVB Financial Group (SIVB)	0.00	190-195	175-178
Synopsys (SNPS)	137.53	69-72	64-66
Take-Two Interactive (TTWO)	123.32	56-59	53-54

Current Market Outlook


During the past three weeks, we’ve seen the market’s breadth begin to sag (small- and mid-cap indexes haven’t made much progress in three months), then we saw some key sectors falter (financials have decisively broken down) and now the market’s own intermediate-term trend is on the fence. That’s enough yellow flags for us to advise trimming your sails a bit; we’re nudging our Market Monitor down to a level 6, as the onus is on the bulls to pull us out of this near-term funk. However, longer-term, we’re much more optimistic—today’s show of support was encouraging, of course, and there remains a ton of strong stocks (especially growth-oriented stocks) out there, so you should continue to hold on tightly to your top performers.

This week’s list is chock-full of stocks that have ignored the market’s recent dip. There are many good names to choose from, our Top Pick is Teladoc (TDOC), a newer issue that’s emerging from a long post-IPO droop and consolidation. It has a great story.

Stock Name	Price	Buy Range	Loss Limit
Criteo (CRTO)	0.00	49.5-51.5	46-47
Grand Canyon Education (LOPE)	121.03	66-69	60-62
Lumentum (LITE)	87.00	50-54	43-45
MercadoLibre, Inc. (MELI)	980.83	205-210	196-200
Momo Inc. (MOMO)	44.65	31.5-33.5	29-30
RingCentral (RNG)	238.73	25.5-27	24-25
SiteOne Landscape Supply (SITE)	98.49	44-46	40.5-41.5
Skyworks Solutions (SWKS)	0.00	94-97	87-88
Teladoc, Inc. (TDOC)	127.95	23.5-25	20.5-21.5
Wynn Resorts (WYNN)	121.08	107-111	98-101

In tonight\'s issue, we write about the importance of following your plan, especially soon after you buy a stock. We dive into our new \"7.5% Rule,\" which is another in a long line of studies that show higher prices to be very likely in the months down the road.

Shares of Mindbody (MB) are racing higher today after the company delivered revenue growth of 35.4%, and Shares of LeMaitre (LMAT) are also rallying over 10% after the company reported Q3 revenue growth of 22%

Dave & Buster’s (PLAY) has dipped back toward the top of its prior launching pad as many restaurant stocks have sagged. We’ll place the stock on Hold and keep it on a tight leash. And today, Vulcan Materials (VMC) fell sharply after missing earnings estimates, partially because poor weather in the second quarter delayed construction projects. We’ll respect the stock’s action and move VMC to a Hold rating tonight.

The Emerging Markets Timer is still pointed up, despite the market’s recent consolidation. Our moves tonight are increasing our Buy recommendation for Alibaba (BABA) to a full position, lowering our rating of Telkom Indonesia (TLK) to Hold a Half and returning Weibo (WB) to a Buy a Half recommendation.

We had a terrific week with the vast majority of our stocks, supported by a 0.8% rise in the S&P 600 Small Cap Index. That’s not a big move, but given the recent break-out to all-time highs, a little follow-on strength across the board suggests the market could be setting up for another run higher.

Oil prices and energy stocks have strengthened, so I’m putting Pembina Pipeline (PBA) back on Buy today. However, I’m moving Costco (COST) back to Hold after the warehouse retailer’s latest sales results caused the stock to pull back once more.

Despite the continuing Buy signal from the Cabot Emerging Markets Timer, one of our stocks, Telkom Indonesia (TLK), is not pulling its weight and is now rated Sell.

Not much has changed in our portfolio, though Home Depot (HD) did report solid earnings on Tuesday.