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After last week’s selloff in tech, this week has been relatively calm, though the action at mid-day today suggests we could see more selling before the closing bell.

It’s been another week of mixed stock performance and assorted headlines that collectively give me the sense that, while a lot of investors may be shifting money around, there’s no real consensus yet on what will work and what won’t in the near-term.

The artificial intelligence trade was under pressure last month. But it recovered over the last three weeks. The back and forth has again taken a negative turn after AI bellwethers Oracle (ORCL) and Broadcom (AVGO) reported earnings that didn’t impress investors.

The potential vaccine and mixed election results pushed the market forward this past week, but the acceleration of the pandemic and near-term uncertainty in Washington pulled it back. It is a time to be a bit cautious. Emerging markets are showing some strength, as our timing indicator turns decidedly positive. Rotation into international stocks may be coming.

Alibaba (BABA) is a good example of the push and pulls. The Chinese e-commerce giant raked in a record-breaking $56 billion in sales in the first 30 minutes of China’s Singles’ Day on Wednesday, much higher than the $38 billion total in the entire 24-hour period last year. In comparison, Amazon booked $10.4 billion during its two-day Prime Day event last month. Yet, Alibaba’s stock was down sharply for the week. Find out why inside, where you can also learn about this week’s new SPAC recommendation.

It’s still a narrow rally at this point, but we are seeing more names begin to pop higher, whether on earnings or some other news, with some shakeouts-and-recoveries, some earnings gaps that see immediate follow-through and more names setting up. (We don’t hate the selloff in defensive stocks, either.) It’s not definitive yet, but we will nudge the Market Monitor up to a level 5 and see how it goes.

Growth names make another good showing this week, with a variety of sectors (outside of retail, which has been rough) represented. Our Top Pick is a big-cap chip name that has stormed back after a spring correction.

The recent market rally has leveled off and is wavering. The next few days may determine whether the market rally continues, or the indexes retreat once again.

The latest upturn has been stoked by optimism over retreating inflation and a softer, gentler Fed. The Central Bank is widely expected to raise the Fed Funds rate at a slower 0.50% pace, versus the last four hikes of 0.75%, at the December meeting in two weeks. But Chairman Powell is giving a speech today. Any indication of a higher-than-expected hike will undo the major reason for the recent rally.

As market malaise lingers on, it’s become a stock-picker’s market. Fortunately, we have an entire team of expert stock pickers here at Cabot – and in Stock of the Week, we get our pick of the litter. This year already, that’s resulted in gems like Mike Cintolo’s Corning (GLW) (+50% in six weeks), Clif Droke’s JetBlue (JBLU) (+17% in two weeks) and Carl Delfeld’s TransAlta Corp. (TAC) (+10% in a month).

So today, we try to uncover another gem by going back to the well on a former Stock of the Week – and market – darling that has recently rediscovered its mojo. Cabot Dividend Investor Chief Analyst Tom Hutchinson never gave up on it and is now higher on it than ever.

Details inside.

Current Market Outlook


Last week was generally one of rotation back out of growth and into the broader market, and today, that trend accelerated, with growth-oriented funds and indexes (like ARKK and IWO) gapping below multi-week support and longer-term moving averages, while many recent leaders tested their 50-day lines. This sets up a key test—if a lot of stocks go down the drain, it’ll clearly be a sign of cut back on growth titles, though if we see a strong bounce from here, it could actually set up some decent pullback/resumption entry points. Meanwhile, we’re seeing an increasing number of setups in the cyclical areas, which are coming to life after two-plus months of rest. Right here, we’re not making any dramatic changes, but be sure to honor your stops. The next few days could be telling.

As for this week’s list, it definitely has more of a turnaround/cyclical feel to it as those stocks find buyers. Our Top Pick is Paylocity (PCTY), a leader in what’s looking like a new group upmove for HRM stocks.

Stock Name	Price	Buy Range	Loss Limit
Avis Budget Group (CAR)	93	91-94	81-82.5
CPRI (CPRI)	58	57-59	52-53
Colfax (CFX)	49	48-49.5	44.5-45.5
Dexcom (DXCM)	506	488-508	445-455
Five Below (FIVE)	228	221-228	200-204
HubSpot (HUBS)	657	630-650	570-580
LTHM (LTHM)	25	23-25	19.5-20.5
Nucor Corporation (NUE)	124	117-122	103-106
Paylocity (PCTY)	251	242-248	214-218
Saia Inc. (SAIA)	247	237-244	217-220

With markets expecting a deal right around the corner, the Trump administration signaled its frustration by threatening to raise tariffs on roughly $200 billion of Chinese imports to 25%, from 10%, last Friday.

Embattled healthcare company Kenvue (KVUE) just received a buyout offer from Kimberly-Clark (KMB); does that make shares of the company behind Tylenol a buy, hold or sell?

Current Market Outlook


For the first time in a few weeks, we’re seeing some signs of spring when it comes to the Nasdaq and growth stocks, as many found support near or above their early-March lows and have begun to perk up, including some that have rallied back above their 50-day lines. (The Nasdaq itself has done this, too, which is obviously encouraging.) Moreover, we’re seeing many more six- to 10-week structures out there, which are far more palatable than the jagged three-week bases seen a while back. That said, we’re not out of the woods—the major indexes remain divergent (not the healthiest situation) and very few growth names are hitting new highs. For the first time in a while, we do think the market has a chance to kick into gear, but we have to see it to believe it; we’re nudging our Market Monitor up to a level 6, but still think the general game plan (small positions, buying cyclical names on weakness) makes sense for now.

This week’s list is a nice mix of growth and cyclicals, many of which look like either potential breakouts or early-stage pullbacks. Our Top Pick is Amkor Technology (AMKR), which might need a little more seasoning but has held up great during the correction and is now pushing ahead.

Stock Name	Price	Buy Range	Loss Limit
10X Genomics (TXG)	191	182-187	164-168
Align Technology (ALGN)	548	538-560	490-500
Amkor Technology (AMKR)	26	24.5-26.5	21-22
Cleveland-Cliffs (CLF)	19	17.5-19	16-16.5
The Gap, Inc. (GPS)	30	28.5-30.5	25.5-26.5
Lam Research (LRCX)	661	620-645	565-580
Lennar (LEN)	105	98.5-102.5	90-92
Micron Technology, Inc. (MU)	94	91.5-94.5	83-85
Scotts Miracle-Gro (SMG)	253	237-247	220-226
ShockWave Medical, Inc. (SWAV)	133	125-130	110-114

There are no rating changes in today’s update.