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There are a few yellow flags out there, from short-term sentiment measures to a weakening broad market (our Two-Second Indicator is again unhealthy), but the trend of the major indexes is firmly up, and the action of growth stocks has been terrific, including a bunch that have surged on earnings in recent weeks.

Current Market Outlook


The market’s not all peaches and cream, as many sectors have been doing more gyrating than advancing, the broad market is iffy and the number of stocks hitting new highs has been falling on each push higher. But we always place most of our emphasis on the primary evidence—the trend of the major indexes and the action of leading stocks—and on that front, the evidence is clearly positive, so we remain heavily invested. The goal from here is to simply follow the system—hold on to your strong performers (though taking partial profits here or there is fine), honor your stops with any stocks that hit potholes and look for new leaders that show explosive strength.

This week’s list is again heavy on recent earnings winners, though it has more of a small- and mid-cap flavor to it. Our Top Pick is Splunk (SPLK), a leading Big Data software firm that has gotten going after a long consolidation.

Scheduling Note: Due to the Thanksgiving holiday, there will be no Movers & Shakers this Friday or Top Ten issue next Monday (one of our two scheduled weeks off all year). Have a great holiday weekend!

Stock Name	Price	Buy Range	Loss Limit
Bluebird Bio (BLUE)	0.00	153-161	137-141
Canada Goose Holdings (GOOS)	46.21	24.5-26	22-23
Cypress Semiconductor (CY)	0.00	26-17	15-15.5
ICU Medical (ICUI)	0.00	202-207	188-192
Nutanix (NTNX)	55.91	28.5-30	25-26
Red Rock Resorts (RRR)	34.70	27-28	25-25.5
RH Inc. (RH)	252.93	96-101	86-90
Splunk (SPLK)	207.67	78-82	71.5-73.5
Westlake Chemical Corp. (WLK)	0.00	90-93	84-86
Wingstop (WING)	121.52	37-39	34.5-35.5

Note: To accommodate our Thanksgiving week schedule, there will be no issue of Cabot Stock of the Week published next week. The next issue will be published November 28.

As for today, the broad market’s long-term trend remains up, and today my recommendation is an undervalued stock recommended by Azmath Rahiman, chief analyst of Cabot Benjamin Graham Value Investor.

With today’s recommendation, I swing back to the aggressive side, with a technology company that is revolutionizing (well, maybe that’s too strong a word) the marketing industry. In any case, it’s growing very fast and it’s expected to turn profitable this year.

Today’s addition to our portfolio is different from the rest in a number of ways. It’s not a pure-play cloud software stock, though it has a software division that generates 26% of revenue. It’s not a pure-play medical device stock, though it has a medical division that generates 33% of revenue. It’s not even based in the U.S.!

Today’s recommendation is a stock that you may never have heard of, and there are pros and cons to that. But it will certainly bring diversification to the portfolio, and I leave it to you to decide if the stock is right for your portfolio as well.

Despite the sting of today’s pullback that included just about the entire market, the Cabot Emerging Markets Timer is holding on to its buy signal. We’re watching the big Party Congress in Beijing and are paying attention to the flat performance of a few of our stocks over the past few months. But with good profits in many of our stocks, we’re willing to be patient as we head into earnings season.

In tonight’s issue, we go over all our recent moves, dive into the recent action in one of our stocks and review one of our proprietary indicators that, along with some precedent analysis, adds further evidence to the market’s bullish outlook.

Current Market Outlook


The answer to the question above is simple: Go up! And that’s what all of the major indexes have been doing in recent days, knocking out all-time highs amid a vacuum of selling pressure. Short-term, there are some signs of complacency, and of course earnings season is coming up, which always adds volatility to the mix. Both of those factors probably mean you shouldn’t buy stocks with both fists. But the big picture is clear: It’s a bull market, and while the below-the-surface action continues to show some rotation, the odds favor higher prices ahead. You should be holding your top performers and looking to grab shares of new leaders as opportunities arise.

This week’s list has a nice mix of growth, “old world,” big and small, reflecting the broad strength in the market. Our Top Pick today is HubSpot (HUBS), which is a bit thin and jumpy, but has a great fundamental story and recently broke out on excellent volume.

Stock Name	Price	Buy Range	Loss Limit
BeiGene (BGNE)	170.20	106-112	95-98
Five Below (FIVE)	134.58	54-57	50-52
HubSpot (HUBS)	582.89	82-85	75.5-77
LGI Homes (LGIH)	86.04	49-52	45.5-47.5
MyoKardia (MYOK)	108.56	39-42	34-36
RH Inc. (RH)	252.93	69-73	64-67
ServiceNow (NOW)	341.86	117-122	109-112
Tronox (TROX)	0.00	23.5-25.5	21.5-22.5
United Rentals, Inc. (URI)	0.00	136-140	126-128
Yelp (YELP)	41.30	44-46	40-41

The market hit a pothole today, which isn’t totally unexpected given the recent run-up; in fact, in the short-term, we don’t see much of an edge either way, as earnings season is underway and growth stocks have generally been lagging.

However, longer-term, the evidence remains piled up on the bullish side of the ledger, both via our trend-following indicators and with a growing number of bullish studies. Thus, we remain heavily invested, though we remain choosy on the buy side given the market’s short-term uncertainties.

Despite some nervous-making weakness last week, the Cabot Emerging Markets Timer has bounced back to regain its green-light status. And with our stocks acting well, the situation looks excellent, although we’re issuing the usual bull-market warnings that this can’t go on forever.

In choosing today’s stock, I leaned conservative, and found a dividend-paying stock with strong growth prospects. When I selected it yesterday, the stock was at the bottom of its recent range, but today it shot up to near the top of that range. It’s still a good story, but I’d like it better where it was yesterday.

Current Market Outlook


There’s still another couple of weeks to go, but so far, earnings season has been good for the market, not only driving the major indexes to new highs last week but reinvigorating many growth stocks and launching a few fresh breakouts and new leadership. In the short-term, we expect continued volatility among the indexes and various sectors based on earnings reports and news flow (both financial and otherwise), with dips possible after last Friday’s moonshot advance. But the evidence remains bullish in the intermediate- and longer-term. Thus, we’re sticking with a bullish stance, and advise you to hold your strong performers and look to latch onto new leaders as they lift off, while getting out of any holdings that crack.

This week’s list has many earnings winners from last week in a variety of industries, as well as a few names set up well ahead of their reports. Our Top Pick is First Solar (FSLR), which looks like a powerful turnaround after blasting ahead following a blowout earnings report. Try to grab shares on dips.

Stock Name	Price	Buy Range	Loss Limit
Avis Budget Group (CAR)	0.00	40-42	36.5-38
Dana Holding (DAN)	0.00	28.5-30	26-27
First Solar (FSLR)	83.74	57-60	51-53
Flir Systems (FLIR)	0.00	44.5-46.5	40.5-41.5
GrubHub (GRUB)	140.03	57.5-60	53-54.5
Polaris Industries (PII)	0.00	113-119	104-107
PulteGroup (PHM)	45.93	28.5-30	26.5-27.5
STMicroelectronics (STM)	30.09	22-23.5	19.5-20.5
SVB Financial Group (SIVB)	0.00	212-220	197-203
Terex (TEX)	0.00	45-47	41.5-42.5

Current Market Outlook


In the short-term, there’s no question the market is “overbought” and there are some signs of complacency, so we’re not ruling out a market-wide shakeout, some kind of below-the-surface correction or simply a tricky earnings season. But the real money is in the intermediate- and longer-term moves, and on that front, the vast majority of evidence remains in the bull camp, as the trends of the indexes are pointed up, leading stocks are acting well and some new leadership is starting to emerge on earnings. Thus, our game plan remains the same—you should generally be holding your strong stocks (though booking a few partial profit is fine) and looking to do some buying either on pullbacks (for stocks that ran up strongly in September) or on powerful breakouts (likely on earnings).

This week’s list contains another varied batch of strong stocks, including a couple that have shown superb power in recent days. Our Top Pick is Skechers (SKX), which exploded higher last week after a blowout quarter—we advise starting small and adding shares if the stock continues higher.

Stock Name	Price	Buy Range	Loss Limit
Beacon Roofing (BECN)	0.00	53-55	49-50
Cree, Inc. (CREE)	67.96	32.5-34.5	29-30.5
Essent Group (ESNT)	0.00	42-44	39-40.5
HollyFrontier Corporation (HFC)	0.00	35-36	32-32.5
Michael Kors Holdings Limited (KORS)	73.22	47.5-49	45-46
Navistar International (NAV)	0.00	41.5-43.5	37.5-39
Proofpoint (PFPT)	113.79	91-94	87-89
Skechers (SKX)	0.00	32-34	28-29.5
Sohu.com (SOHU)	0.00	64-67	59-61.5
Zogenix (ZGNX)	46.50	36.5-38.5	33-35

We’re adding a new 5.3% yielding stock to the High Yield Tier. Most of our other positions are rated Buy as well, and the market is strong, so if you’re underinvested, it’s time to put some money to work.