Stock Market Video 3/2/2012

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In this week's Stock Market Video, Cabot China & Emerging Markets Report Editor Paul Goodwin says it's been another good week in the markets. There's no way to avoid this is a bull market, Paul says, and it's high time to increase your exposure to growth stocks. Featured stocks: CA Inc. (CA), Celgene (CELG), Cummins (CMI), Eastman Chemical (EMN), Francesca's (FRAN), Jabil Circuit (JBL), Lululemon (LULU), Monster Beverage (MNST), Zumiez (ZUMZ) and Parametric Tech (PMTC).


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Dear Fellow Investor,

When I'm talking to people about investing in emerging market stocks, I'm always aware that I have two choices. The first is to spout statistics:

*    About China's 1.3 billion people
*    The build-out of Internet access
*    The rising power of the Chinese consumer
*    The country's decade of double-digit economic growth
*    Colossal investment in infrastructure.

There's no doubt that these are impressive factors, and they certainly point to a national economy that's in high gear. But I don't think they tell the whole story.

If a growing economy automatically produced stock market gains, an investor's job would be very simple. You could just buy an ETF for that country and watch the money roll in.

But stock markets are too complex to reward that strategy, as investors are always looking ahead by six months or so. And just drawing a straight line that extends the current trend is almost sure to miss the mark.

As the emerging markets develop, their economies often rocket ahead, lifted by industrialization, urbanization, entrepreneurship and foreign direct investment. 

And the stocks of the companies doing business in these countries can blast off right along with them. This is what investors in Baidu (BIDU), China Mobile (CHL) and (CTRP) found out a few years ago.

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Just last year:…

Our top auto stock was up 127% in four months.
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Paul Goodwin Signature

Paul Goodwin

Editor, Cabot China & Emerging Markets Report



[ Music ] 

>> Hi. I'm Paul Goodwin, and this is your Cabot Weekly Video Review. It's been another good week in the markets and I, I don't think if you take a look at the S&P 500 Chart here, I don't think there's any way you can avoid the feeling that this is definitely a bull market and Cabot growth advisories would be saying that it's time to be increasing the amount of your exposure to growth stocks. 

Also you can take a look here at the USX China Index, which is the index that tracks the ADRs that, that I advise about in the Cabot China & Emerging Markets Report. And you can see that after having made a, a nice recovery since the middle of December, the index has come up and is trading sideways. This is very normal. It's exactly what indexes have to do. They can't go up forever or, or they won't bring any new investors in or shake any old investors out. So that's kind of what I want to talk about today. 

I, I found a list of stocks that have been -- had interesting gaps up and then our -- it's, it's the decision of what to do with them after they gap up, that, that becomes difficult. Obviously if you own them, they gap up, you can sell at least half of it there, book the profit, hold onto the rest and see what happens. But if you have been following a stock or you just noticed that one has gapped up and you're not quite sure how to handle it after that. 

So here are just a few examples for you to look at. This is CA Industries -- had a great, great gap up here in January. And then kept going and now it looks like it has, it's basically moving sideways. Is this buyable here or not? 

Another example, Celgene, very well known stock, has a nice jump here, not quite a gap up, but then it's, it's trading sideways and you can see even a little better if you look at the, at the weekly view. 

Another one, CMI. Again, big gap, especially one on good volume and then it's, it's holding on, but isn't showing any additional movement and volley was falling off. Eastman Chemical, again, you know, big, big gap up on, on great volume, then goes up and now is trading sideways again. 

What we would say is that these stocks, a gap up, especially a good gap up on earnings tends to give stocks additional momentum and that they will frequently advance significantly beyond that gap. But in this case, we have, you know, pretty much a flat movement and the volume was falling off. 

And finally, JVL. These are -- JVL hasn't had quite the gap, but after this nice, long run, it's trading sideways here. Personally, I think JVL is investable right here, but for the others, it's, it's a bit of a mystery. 

So I have a few here that I think will, will give you some insight into this. This is LULU, again, Lululemon gap up on great volume, goes up, pulls back a little bit and then we get this nice volume clue here, just today. This is the kind of thing you want to look for. You want to let the volume and the, the technical chart for the stock give you a little clue as to whether it's going to be going higher or not. 

Here's, here's Monster Beverage, which is what -- I've -- it's, it's, it's changed its name, it used to have a nice little green, cute, fuzzy puppy name, now they've decided to go with Monster. So, you know, here's your gap, here's another volume clue and after this, then we get this third volume clue and the stock is taking off. So this would have been the clue right here to buy the stock. 

Zumiez, kind of a hip clothing retailer, takeoff on good volume, another gap up, but then a lot of sideways, and then today, a good pop out of its previous range on good volume. And then Parametric Tech, gap up on volume, sideways, and then we've had three above average days when it's advanced and you can see that the price is just ready to break out above this and it was that -- it's that breakout that you'll want to buy. So when you have a gap up and a stock that's trading sideways after, what you want to look for is the clues that tell you that buyers are becoming more interested, breakout on the price side and additional volume on the upside. 

So, that's it for this week. If you need anymore information about any of Cabot's newsletters, you can always find us at Thanks. See you next week.

[ Music ]


Paul Goodwin Paul Goodwin 
Emerging Markets Specialist, Analyst and Editor of Cabot China & Emerging Markets Report

A researcher and writer for over 30 years, Paul Goodwin has been a member of the Cabot investment team and editor of Cabot China & Emerging Markets Report since 2005. Under Paul’s stewardship, Hulbert Financial Digest rated Cabot China & Emerging Markets Report the #1-rated newsletter of 2006 with a 78.6% gain for the year, and the #1-rated newsletter of 2007 with a  74.1% return. Cabot China & Emerging Markets Report was also named 2007 Investment Letter of the Year by Peter Brimelow of MarketWatch

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