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Current Market Outlook


Growth stocks have stabilized and the market has quieted down following the sharp Nasdaq-led selloff, allowing some stocks to bounce back nicely and other new leaders to flex their muscle. Short-term, we wouldn’t be surprised to see some follow-on selling in some of the damaged areas (we still think chip stocks, for instance, look iffy), and some year-end uncertainties (tax reform, government shutdown) could always cause some wobbles. But you know us—we go with the evidence in front of us, and with the major trends of the major indexes and most leading stocks pointed up, we remain mostly bullish. As always, you want to sell stocks that are breaking down and focus new buying on fresher leadership stocks that have shown excellent volume clues.

There are many such examples in this week’s list, which has a wide variety of good-looking charts and stories to choose from. Our Top Pick is Etsy (ETSY), a niche online retailer that’s just turning profitable and has powerfully broken out during the past week.

Stock Name	Price	Buy Range	Loss Limit
Ally Financial (ALLY)	30.44	27.5-29	24.5-26
Boise Cascade (BCC)	0.00	38-40	35-36
Charles Schwab (SCHW)	0.00	49-51.5	46-47.5
D. R. Horton (DHI)	66.55	48-50	44-45.5
Etsy (ETSY)	112.97	18.5-20	16.5-17
First Solar (FSLR)	83.74	64-68	56-59
G-III Apparel (GIII)	45.25	32-34.5	28-30
Global Blood Therapeutics (GBT)	0.00	41-44	36-38
NetApp (NTAP)	0.00	56-58	51-52.5
Roku, Inc. (ROKU)	150.46	43-47	35-37.5

There are only a few companies out there that provide the software that companies can use to implement IT cost-accounting. Today’s Cabot Small-Cap Confidential candidate is pioneering the entire movement.

The market weakness that I mentioned last week has vanished, and with it my cautious stance. Thus, this week’s stock is what we call a zinger—a stock that has been hot, and will likely remain hot for a substantially longer period of time as investors learn about its great growth story.

Today’s recommendation is a medical device company whose one product—an insulin delivery system for diabetics—is growing market share rapidly.

Current Market Outlook


The past week saw yet another round of rotation, but this one was the sharpest and most violent we’ve seen all year, with many leading growth stocks getting crunched while other areas of the market (especially those benefiting from likely lower corporate taxes) surged. Our advice, as usual, is to follow the plan—some growth stocks look very toppy after long, uninterrupted runs, and for those, selling (or partial selling) makes sense. But other growth stocks are pulling back normally, and some new leadership is emerging. It makes sense to pull in your horns a bit, possibly holding some cash until the market settles down; we’ve nudged our Market Monitor down to reflect that. Right now, we advise taking things on a stock-by-stock basis, holding your resilient/advancing issues, while honoring your stops and selling names that break down.

This week’s list is heavier on cyclical, building and retail stocks, all of which have caught huge updrafts during the past few days. Our Top Pick is Warrior Met Coal (HCC), a big turnaround play in the coal sector. Buy on dips.

Stock Name	Price	Buy Range	Loss Limit
Beacon Roofing (BECN)	0.00	60-63	55-56.6
CH Robinson (CHRW)	0.00	84-87	78-79.5
E*Trade Financial (ETFC)	0.00	48-50	44.5-46
Gardner Denver (GDI)	0.00	30-32	27.5-28.5
GrubHub (GRUB)	140.03	64-67	57.5-59.5
Michael Kors Holdings Limited (KORS)	73.22	55.5-57.5	51-52.5
Peabody Energy Corporation (BTU)	43.32	32.5-33.5	29.5-30.5
Tyson Foods (TSN)	0.00	80-83	74-76
USG Corp. (USG)	0.00	36.5-38	34-35
Warrior Met Coal (HCC)	0.00	21-22.5	17.5-18.5

Today’s featured stocks include two new additions to the portfolios and a stock that seems ready for a huge price rebound.

Today’s recommendation is a chain restaurant—a chain I’d never even heard of—but the company is growing fast and the chart is very constructive.

In tonight’s issue, we dive into some education, revealing a long-term chart pattern that bodes well (including one stock that’s at the top of our Watch List now). We also give you all our latest thoughts on the market and our recommended stocks, and present the usual crop of new ideas if you have some cash on the sideline.

As 2017 comes to a close, we all have a lot to be thankful for, as the bull market provided us with a great environment for stock picking. There’s always room for improvement (which we’ll probably write about in future issues), but coming into this week the Model Portfolio was sitting on a gain north of 40%. We’ll take it.

Looking ahead, we remain bullish, especially longer-term, as some big-picture indicators point toward higher prices. Near-term, though, it’s hard to ignore the optimistic sentiment, which we write about in today’s issue. It’s very inexact, so we don’t base trading decisions on it, but it’s good to remember to keep your eyes (and your options) open.

Today’s recommended stock is an old-world company in a prosaic business, and its prospects are bright as it reaps improved efficiencies from its recent big merger.

We’ve pared back during the past few days in the Model Portfolio, but we\'re not sticking our heads in the sand and are giving our profitable stocks room to consolidate. In tonight’s issue, we dive into our game plan for our remaining stocks, and we also do some sector analysis, including two areas that are launching new leaders.

In today’s issue, we’re adding a reliable new stock to the Safe Income Tier. I also review why you might want to own preferred stock in today’s educational section, and provide updates on all our holdings.