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Current Market Outlook


Early January is almost always a tricky time as big investors rotate and reposition their portfolios, leading to lots of crosscurrents and volatility. We saw some of that today and won’t be surprised to see more gyrations in the days ahead. Thus, we’re focusing mostly on the bigger picture, and on that front, the trend remains up, and we’re seeing a lot of pullback resumption set-ups (mostly from cyclical and financial stocks) and base-breakout set-ups (among some growth-oriented stocks). Now’s not the time to chase a stock’s every tick higher or lower, but you should remain bullish, and have a list of set-ups ready should the buying pressures resume after the modest late-December market retreat. We’re leaving our Market Monitor at a level 8 out of 10.

This week’s list has many stocks that have formed the aforementioned set-ups—should they resume their uptrends, many could have nice runs. For our Top Pick, we’re going with Micron Technology (MU), which gapped up strongly on earnings two weeks ago before pulling back. Dips look buyable to us.

Stock Name	Price	Buy Range	Loss Limit
Arista Networks (ANET)	0.00	95-98	90-92
Dave & Buster’s (PLAY)	57.01	54-56.5	51-52
HD Supply Holdings, Inc. (HDS)	0.00	41-43	37.5-38.5
Micron Technology, Inc. (MU)	43.31	21.5-23	19.5-20
Nabors Industries (NBR)	0.00	16-17	14.5-15
Oasis Petroleum (OAS)	12.57	14.5-16	13-13.5
Quanta Services (PWR)	91.45	34-36	31.5-32.5
Texas Capital Bancshares (TCBI)	0.00	76-78	71-72
United States Steel Corporation (X)	0.00	31.5-33	29.5-30.5
WellCare Health Plans, Inc. (WCG)	271.83	135-138	127-129

Current Market Outlook


With some weekend polls showing the chance of a “Brexit” lessening, the market gapped up this morning and finished with solid gains. Today’s rally is obviously encouraging and hints that, should the vote on Thursday go as expected, buyers could take control afterwards. Still, as always, we don’t predict—right now, the evidence remains more bullish than not, so it’s best to hold your strong, profitable stocks and add new leaders as they develop. That said, the intermediate-term trend of the indexes is mostly neutral, and until the uncertainty clears up, it’s a good idea to keep new positions smaller than normal, and to honor your stops and loss limits.



The good news is that most top performing stocks handled the market’s 3% dip in fine fashion. This week’s list is another batch of (mostly familiar) names that look great. Our Top Pick is Weibo (WB), a little-known Chinese firm that looks like one of the market’s top glamour stocks.

Stock Name	Price	Buy Range	Loss Limit
wb (wb)	0.00	26-27.5	23.5-24.5
symc (symc)	0.00	19.5-20.5	18-18.5
simo (simo)	0.00	43-45	39.5-40.5
oled (oled)	0.00	67-69	60-62
nvro (nvro)	0.00	71.5-74	66.5-67.5
nuva (nuva)	0.00	57-59	54-55
lulu (lulu)	0.00	69.5-71.5	66-66.5
five (five)	0.00	44-45.5	41-41.5
cprt (cprt)	0.00	47.5-49.5	44-44.5
Barrick Gold (ABX)	0.00	19-20.5	17-17.5

We look at hundreds of charts every week, and we’ve seen worse environments than this—while high-growth stocks have taken a beating, much of the broad market is at least hanging in there. But the fact is that as long as the intermediate-term trend of the major indexes is pointed down, it’s going to be tough to make much money; the last couple of trading days has reinforced that fact. Thus, while a little buying here or there is fine, especially in resilient groups, less is generally more in this environment—preserving most of your capital and building your watch list are what will pay off down the road.

The good news is that, as earnings season progresses, we’re able to see which stocks have “it,” and which ones are being tossed out by big fund managers. This week’s list has a few recent earnings winners, including our Top Pick, Harley-Davidson (HOG), which just blasted out of a 14-week base on a great quarterly report.

Stock Name	Price	Buy Range	Loss Limit
WABCO Holdings (WBC)	0.00	104-107	97-98
Skyworks Solutions (SWKS)	0.00	39-41	35-36
SunEdison (SUNE)	0.00	18-19	15.5-16
SunPower (SPWR)	12.26	34-35	29-30
Salix Pharmaceuticals (SLXP)	0.00	102-106	98-100
Matador Resources Company (MTDR)	27.89	26-27	24-24.5
Harley-Davidson Inc. (HOG)	0.00	70-72	66-67
Delta Air Lines (DAL)	54.28	35-36.5	33-34
Comstock Resources (CRK)	0.00	25-27	22-23
Cabot Oil & Gas (COG)	0.00	36.5-38	35-35.5

Current Market Outlook


September is often a herky-jerky month, with crosscurrents arising as institutional investors position their portfolios for the rest of the year. So far, though, despite some ups and downs in the major indexes, the action has been encouraging—growth stocks are waking up, with some glamour stocks (including a few recent IPOs) tearing up the charts. As we’ve written repeatedly, there are still some dark clouds out there; despite the improved action, we still see many broader, smaller-cap indexes acting poorly, and even the big-cap indexes have hit resistance in recent days. But the action of individual stocks continues to have us leaning bullish.

This week’s list has a few out-of-the-way ideas today, and our Top Pick is one of them—Mallinckrodt (MNK) is a little-known (but well-established) drug firm with huge earnings estimates for the next few quarters. And the stock has been super strong during the past few weeks.

Stock Name	Price	Buy Range	Loss Limit
Western Refining (WNR)	0.00	46-48	42.5-43.5
Mallinckrodt (MNK)	0.00	82.5-85.5	75-76
Health Net (HNT)	0.00	44-46.5	42-43.5
GoPro, Inc. (GPRO)	0.00	57-61	50-51
Green Plains Energy (GPRE)	0.00	43-45	39.5-40.5
Chipotle Mexican Grill (CMG)	773.32	660-685	625-635
Cavium (CAVM)	0.00	52-54	49.5-50.5
Baidu (BIDU)	0.00	218-228	205-208
Banco Bradesco (BBD)	0.00	17-18	16-16.5
Ambarella (AMBA)	52.79	36-38	32-33

The market isn’t in awful shape, but it’s not in as good shape as the major indexes would have you believe—the advance has been narrowing for a while now, and last week, as the Dow and S&P leapt to new highs, many stocks and sectors lagged behind. It’s not the end of the world and there’s nothing that says the market can’t chop around for a bit, get its act together and march higher; we’re certainly not advising you to sell everything. But given the evidence, and the fact that earnings season picks up this week, we think it’s best to keep our Market Monitor in neutral territory and see what comes.

Backing up that thought is this week’s list—there are a few very enticing ideas, but it’s not exactly chock-full of young whipper-snappers. Our favorite of the week is GameStop (GME), a stock that’s strong because of industry-specific factors that should boost earnings later this year.

Stock Name	Price	Buy Range	Loss Limit
Yahoo (YHOO)	0.00	23-24	21.5-22
Tesla, Inc. (TSLA)	818.87	40-42	35-36
Toyota Motor (TM)	0.00	105-110	98-100
Regeneron Pharmaceuticals (REGN)	512.96	195-205	180-185
Omega Healthcare Investors (OHI)	0.00	30.5-31.5	28.5-29
International Paper Company (IP)	0.00	45-46	42-43
GameStop (GME)	0.00	29.5-31	27-28
Avis Budget Group (CAR)	0.00	26-28	24-25
BlackRock (BLK)	0.00	250-260	240-245
BE Aerospace (BEAV)	0.00	58-60	55-56

This is the week of the debt ceiling deadline, and while it appears Washington is coming close to a deal, nothing is final yet. And that means continued uncertainty in the days ahead, so be sure to continue following the evidence. Thus far, the evidence remains encouraging: most stocks are in good shape, and while some abnormal activity was spotted last week, the bulls have stepped up to the plate since. We remain in a “lean bullish” stance, holding some cash but also holding our best performers and looking for new buys on dips.

This week’s list highlights the newfound strength in energy stocks—there’s four of them featured this week. Our favorite is Continental Resources (CLR), which we think is an emerging blue chip in the sector, though all of its energy peers also have solid prospects.

Stock Name	Price	Buy Range	Loss Limit
Yandex (YNDX)	0.00	36.5-38	33-34
Melco Crown (MPEL)	0.00	32-33.5	28-30
Cheniere Energy (LNG)	63.82	34-36.5	30-32
HCA Healthcare (HCA)	137.60	45-46.50	39-40
Facebook, Inc. (FB)	0.00	47-49	43-44
Dril-Quip (DRQ)	0.00	113-115	109-110
Carrizo Oil & Gas (CRZO)	24.03	40.5-42.5	36.5-37.5
Continental Resources (CLR)	66.19	108-112	100-102
Infoblox Inc. (BLOX)	0.00	41-43.5	36-37
ARM Holdings (ARMH)	0.00	46-48	43-44

WHAT TO DO NOW: Remain cautious, as there’s not much change with our indicators or stance—the intermediate-term trend of most stocks, sectors and indexes is down, and while sentiment is very bearish and a decent number of growth stocks are holding well, it’s best to stay close to shore until the buyers return. Yesterday, we sold one-third of our remaining position in ProShares S&P 500 Fund (SSO) and are now holding about 55% in cash.

Energy stocks are in the news right now, partly because some of them have begun their price rebounds from recent pullbacks, and partly due to a focus on oil prices during the current Middle East conflict. Here’s a quick assessment and comparison of our four energy stocks.

The market is taken another shot across its bow, with the indexes bending, with many leaders getting dented and with our Two-Second Indicator still negative. That said, while bending, things haven’t broken, with our Cabot Tides still positive and most leaders refusing to crack. We’re not complacent, as we’re holding our 30% in cash and placing three stocks on Hold--but we’re also not running for the storm cellar, as earnings season is likely to determine the next big move in the market and leaders.

Selling accelerated this week after last week was the worst since September. The S&P is down 4% YTD and at its lowest level in more than five months. The Nasdaq index is in correction territory, down more than 10% from the high.

The big issue seems to be tariffs. Tariffs on China, Canada, and Mexico are escalating. The new Canadian Prime Minister also appears to be taking a hard line, and it looks like the trade issues won’t be resolved for a while. But it’s also the fact that tariffs are hitting the economy at a vulnerable point as fears of a slowing economy are growing.

These two companies have reinvented themselves and could become industry leaders again in just a few years.

General Electric (GE) and Proctor & Gamble (PG) are among the most popular stocks owned by Congress.

This week, we comment on earnings from Walgreens Boots Alliance (WBA).


We also include the Catalyst Report and a summary of the April edition of the Cabot Turnaround Letter, which was published on Wednesday. We encourage you to look through the Catalyst Report. This report is a listing of all of the companies that have reported a catalyst in the past month. These catalysts include new CEOs, activist activity, spin-offs and other possible game-changers. We source many of our feature recommendations from this list. You will find it nowhere else on Wall Street.

In today’s note, we discuss the recent earnings reports from Duluth Holdings (DLTH) and Kohl’s (KSS). Our note also includes the monthly Catalyst Report and a summary of the December edition of the Cabot Turnaround Letter, which was published on Wednesday.