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Today’s stock candidate is a promising small-cap biotech with two high-potential drug candidates, each of which could develop into a billion-dollar asset.

The title of today’s issue is “Don’t Overreact”—the major trend of the market is still up, and there are many signs pointing to higher prices in the months ahead. Chloe adds a new stock to the Safe Income Tier and presents her view on the forces affecting interest rates and income investments today.

This week’s recommendation is a special situation—a transport stock that, thanks mostly to a game changing acquisition, is poised for major earnings growth. And the stock is holding up well after a recent earnings pop.

Current Market Outlook


After a big run last year and a moonshot during January, the sellers have finally come out of the woodwork, pushing the major indexes (and many leading stocks) sharply lower during the past six trading sessions, including a mini-crash today (the Dow was down 1,500 points at one point!). Looking at the evidence, the bull market (longer-term trend) is still intact, but the intermediate-term trend has turned negative and many leading stocks have come unglued. In the near-term, we certainly wouldn’t be shocked to see a snap back, but following a major extreme in price and sentiment two weeks ago and this abnormal selling, stocks probably need some time to wear out the weak hands and digest their recent gains. We’re moving our Market Monitor down to neutral to respect the change in the evidence—we don’t advise selling wholesale here, but you should honor your stops and loss limits, and on the buy side, be very choosy and keep new positions small until the market finds support.

This week’s list is a potpourri of stocks and sectors, most of which have recently reacted well to earnings. Our Top Pick is Pure Storage (PSTG), a fast-growing outfit that emerged from a base on big volume last month.

Stock Name	Price	Buy Range	Loss Limit
Autohome (ATHM)	98.65	73-77	67-69
BofI Holding (BOFI)	42.93	33-35	30-31.5
Harris Corp. (HRS)	198.60	145-150	137-139
Knight-Swift Transportation Holdings Inc. (KNX)	40.61	46-48.5	42.5-44
LPL Financial Holdings (LPLA)	85.22	59-62	56-57.5
MercadoLibre, Inc. (MELI)	980.83	340-360	310-320
Meritor (MTOR)	21.46	27-28.5	25-25.5
MyoKardia (MYOK)	108.56	47-51	42-44
Pure Storage (PSTG)	25.64	18.5-19.5	17-17.5
Shutterfly (SFLY)	94.71	68-72	59-63

Emerging market stocks corrected sharply along with U.S. stocks today, dropping back to December levels and closing decisively below the MSCI EM ETF’s 25- and 50-day moving averages. We didn’t really need that kind of technical signal to tell us that all growth stocks were falling off the end of the dock, but it’s good to get a formal notice.

The market correction finally arrived swiftly in recent days. If you set aside cash with which to buy low, it’s okay to begin deploying some of that cash. In today’s issue we have one new addition to the Buy Low Opportunities Portfolio.

After a huge run, the market finally hit some turbulence this week, and it’s a 50-50 bet whether we see more profit taking going forward. Our focus is mostly on the bigger picture (still very bullish) and individual stocks, as the advance has gotten more selective and earnings season is revving up. We remain mostly bullish, but it remains important to take things on a stock-by-stock basis.

Today’s recommendation is a little-known but mature industrial company with great growth prospects. Chart risk is small, as the stock has been basing for months, but there is some liquidity risk—this is more thinly traded than any of the current stocks in the portfolio. So if you buy, buy carefully.

Current Market Outlook


After a 10-day, 11% plunge for the major indexes, the market has stabilized for the time being. When looking at the evidence, we see that the longer-term trend is still up, but there’s no doubt the intermediate-term trend is down, the broad market is unhealthy and many stocks have cracked. A bounce could easily get underway at any time, but until the intermediate-term trend turns up (indexes back above their 50-day lines and some stocks acting better), you should play some defense by holding cash, cutting back on new buying and, if you own some broken stocks, using any market rebound to pare back. On the flip side, we still advise holding your resilient stocks—if they’ve held up so far, they have a good chance of doing well whenever the correction finishes up.

What’s interesting is that, despite the market carnage, we saw a ton of positive earnings surprises last week—which is a good way to spot potential leaders down the road. Our Top Pick is Grubhub (GRUB), which has the look of an emerging blue chip.

Stock Name	Price	Buy Range	Loss Limit
Array Biopharma (ARRY)	46.35	16-17	14-14.5
BeiGene (BGNE)	170.20	116-124	103-107
Century Aluminum Co. (CENX)	17.24	20.5-22	18.5-19.5
Fortinet Inc. (FTNT)	137.53	45.5-47	43-44
GrubHub (GRUB)	140.03	81-86	72-75
New Relic (NEWR)	103.70	61-63	56-58
Snap Inc. (SNAP)	16.68	17-19	15-15.5
Twitter (TWTR)	40.37	29.5-32	26.5-28
W.W. Grainger, Inc. (GWW)	311.99	253-270	225-230
Wayfair (W)	167.03	88-92	81-83

If you bought a basket of my 10 Best Marijuana Stocks when the report was originally published in August, you’re off to a great start. Since that report was written, the average of the 10 stocks is up 32%, with the best stock up 131% and the worst down just 4%. Read on for more details.

In this week’s issue, there’s good news about the portfolio’s performance in 2017 and great news about TAL Education. There’s also a new recommendation for a big energy company that’s emerging from the cloud of an enormous national scandal.

The market continues to zoom higher amid a vacuum of selling pressure. In the short-term, though, we’re not seeing a lot of stocks at great entry points and earnings season is coming up, both of which could lead to some pullback or retrenchment, at least on a stock-by-stock basis. But longer-term, there are many positives that tell us the odds strongly favor higher prices down the road.

This month’s candidate is another software stock—but not a high flyer. Rather, this company is still scooting just below the radar, and trades at a big discount to most of its peers. When you value it based on growth, it’s downright cheap—but valuation isn’t why we’re buying it.

Current Market Outlook


The calendar has flipped, but the market environment remains bullish, with the major trends of most indexes and leading stocks continuing to point up. Today saw some rotation back into a few of last year’s leading growth stocks, but we wouldn’t jump to conclusions quite yet—January is known for lots of volatility as big investors reposition their portfolios and, in a couple of weeks, as earnings season gets underway. You should keep your feet on the ground and honor your stops, but you shouldn’t get carried away with daily moves over the next few days; ideally, try to buy strong stocks on normal dips. For overall stance, you should remain bullish.

This week’s list has a nice mix of great stories and charts, ranging from a speculative biotech to a couple of strong energy stocks. Our Top Pick, though, is one of the largest copper miners in the world—Freeport McMoRan (FCX) appears to have blasted off and entered a sustained uptrend after forming a very long launching pad. Try to buy on dips.

Stock Name	Price	Buy Range	Loss Limit
Adamas Pharmaceutical (ADMS)	0.00	32.5-35.5	29-30
American Woodmark (AMWD)	0.00	126-131	113-116
Burlington Stores (BURL)	193.95	115-120	105-108
Diamondback Energy (FANG)	0.00	122-126	110-113
Freeport-McMoRan Inc. (FCX)	13.78	18.5-19.5	16.5-17.2
Floor & Décor (FND)	68.03	44.5-47	41-43
Ollie’s Bargain Outlet (OLLI)	103.94	50.5-52.5	47-48.5
Penn National Gaming (PENN)	45.38	29.5-31	26.5-28
ProPetro (PUMP)	23.30	18.9-19.7	17.2-17.7
Warrior Met Coal (HCC)	0.00	24-26	21-22

Today’s recommendation is a familiar name, not because I’ve recommended the stock before (I haven’t) but because the company’s creations are enjoyed by millions of Americans and a major new acquisition will only increase the company’s reach.

Current Market Outlook


Stocks had another great week, with the major indexes and most leading stocks levitating higher amidst a vacuum of selling pressure. There’s no question things are a bit bubbly here, with most things trading miles above support and moving averages, and as investor sentiment shifts toward greed. Still, more important to us are the intermediate-term trend (clearly up) and the fact that momentum like we’re seeing generally leads to higher prices down the road. Thus, overall, you should remain bullish, but (a) we still favor being choosy on the buy side, looking for pullbacks and shakeouts in stocks that have shown excellent strength and persistency, and (b) having a plan as we enter earnings season, including looking for new leadership that emerges.

This week’s list has something for everyone, from hot growth stocks to news-driven moves to some turnaround situations. Our Top Pick is Red Rock Resorts (RRR), which is part of the strong gaming group and has began to take a breather after a persistent advance.

Stock Name	Price	Buy Range	Loss Limit
Abercrombie & Fitch (ANF)	15.37	18-19	16-16.8
Arch Coal (ARCH)	82.27	92-95	85.5-87.5
Express Scripts Holding Company (ESRX)	79.25	76.5-79.5	70-72
Heron Therapeutics (HRTX)	35.25	19.5-21	17.5-18.5
Matador Resources Company (MTDR)	27.89	30.5-32	28-29
Nucor Corporation (NUE)	66.20	66-69	61.5-63
Red Rock Resorts (RRR)	34.70	32.5-34	30-31
Stifel Financial (SF)	56.32	63-66	58-59.5
Universal Display (OLED)	187.54	188-198	167-175
Wingstop (WING)	121.52	42.5-44	39.5-40.5