Movers & Shakers

by Michael Cintolo on December 19, 2014

This is an excerpt from Cabot Top Ten Trader, which features the best trades to make every week.  Designed for experienced investors who want even more great growth stock ideas, this advisory recommends the best 10 stocks each month for short-term investment by aggressive investors.

On Tuesday afternoon it looked like the market was about to go over the falls—stocks had been selling off fiercely for a few days, and most major indexes were just below their 50-day moving averages. Moreover, a ton of stocks we follow that had been resisting the decline relatively well were also dropping down to (or slightly below) key support.

But since then, the buyers have crushed the sellers. Obviously, the headline moves of 700 points in the Dow are what caught investors eyes, but we’re more impressed with the back-to-back days of big breadth, both in terms of price moves (7.6:1 and 4.1:1 more advancing stocks than declining stocks) and volume (17.6:1 and 8.6:1 more advancing volume than declining volume). Historically, such thrusts often prove bullish over the intermediate-term, especially when coming off a headline-grabbing selloff.

In terms of our primary indicators, the intermediate-term trend came close to rolling over this week, but now it and the longer-term trend are in fine shape. The broad market, however, remains a mixed bag—some stocks look horrible, a lot are building bases, and a few have taken the recent selling/rebound in stride and look great.  

All in all, after easing up on the gas pedal in Monday’s issue, we’re back in a bullish frame of mind … though we’re still not flooring the accelerator. Clearly, in the short-term, some pullback is likely, and there’s nothing that says the past couple of days can’t prove to be a fakeout if oil prices collapse again. And, as we just wrote, there are still plenty of stocks acting so-so at best.

Still, while you shouldn’t go out and buy seven or eight stocks today, we do think nibbling on a couple of strong names makes sense. Most important, make sure you have a watch list of resilient names—if this does prove to be some sort of market kick-off, we think there’s a good chance new leadership names will be emerging from launching pads in the weeks ahead.

Michael Cintolo is Vice President of Investments at Cabot Heritage Corporation, and Chief Analyst of Cabot Market Letter and Cabot Top Ten Trader. A growth stock and market timing expert, Mike is a true student of the market and a technical analysis specialist.

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