Here Comes the Buy Signal | Cabot Weekly Review
In today’s market video, Emerging Markets Investor Chief Analyst Paul Goodwin looks at the new buy signal Cabot's growth advisories have received from the rebound in market indexes. It's still fragile, but it's definitely a buy signal, and you should respond by doing a little buying (one or two stocks) of the strongest names on your watch list. Let the market pull you back in, and if your choices wind up making money, you can wade in deeper. I also look at strong stocks in four categories that look like likely candidates.Stock Market Video Transcript October 9, 2015
Hi, I’m Paul Goodwin, Chief Analyst for Cabot Emerging Markets Investor and this is your Cabot Weekly Video Review.
Another interesting week in the market. It's always an interesting week in the market. Take a look at the S&P 500 here and what you see is the news that we've all been waiting for. We actually had a buy signal from the S&P 500. Take a look at the chart here, what you can see is the 25-day hear actually turned up and the S&P 500 index itself is above both its 25- and 50-days and any way you look at it that is a good sign. It has confirmed the uptrend. If you look at the Dow, you see essentially the same thing. We'll get more on that later, but I would say the only fly in the ointment is that the NASDAQ here, while it is above its 25-day moving average and it looks to be making inroads on its 50, you can't say it's quite as emphatic, which is a reflection of the inability of what we think of as typical growth stocks or ideal growth stocks to actually get moving as much as the market. What we're seeing is a rebalance off low levels and rotation out of sectors that aren’t working into others, but this isn’t the kind of gift horse that you want to look in the mouth.
We have a way to get back into markets when this sort of thing happens and it's not to keep all the cash that you put on the sidelines, assuming that you've been following our guidelines. It's to decide on one or two stocks that you think are going to do well, buy those and then if they do well, if you're making money, if the market is letting you make money, then you buy a little more. You let the market pull you back in rather than jumping in with both feet.
There is something a little fragile about a brand new buy signal and reversals are possible—the market could go down as quickly as it came up, but that’s not the message you want to take away here. The message you want is that we have a new buy signal and even if you're looking at emerging market stocks and this is the iShares for Emerging Markets. You can see we've been in a very nice uptrend here, we're above our 25- and 50-day moving averages, and the lower 25-day has moved up. So, good news all around. There are still plenty of things to worry about, but investors are looking out six months or a year and they have been putting their votes down to think things are going to get better.
So, I have some stocks to look at here. This is Facebook (FB). I know we keep bringing up the same stocks week after week, but here's the daily chart for Facebook and here’s the weekly chart. What you can see is this really long-term uptrend and then this long base that it builds. Here is its blast off and then after the August 24 meltdown, it came back really well.
All of the stocks I'm going to talk about today have 1) great stories and 2) scale. They are not little niche suppliers or anything. They are addressing major mass markets. Everybody knows Facebook, and Facebook has gone around the world, and as it figures out how to monetize some of its recent buys, it should do very well.
This is a favorite of mine, Palo Alto Networks (PANW). Again, the only fly in the ointment might be if we switch to the weekly chart on this William O'Neill Direct Access program here. You can see that this has been going up since 2013 so the question is, and again, this is the weekly, is this enough of a correction in this young chart to get it back on track again? Personally, I think this is one of the leaders in network security and every time we get a new network hack, it should do very well.
So, Activision Blizzard (ATVI), this is a pretty chart. This is a chart with sort of classic blast off here and it has been going up well. You want to buy this somewhere as close to 31 as you can get it and keep a relatively tight stop on it, but the company has been blasting along.
Here are three stocks in the tech area and retail. You know we like under Armour (UA). Here's the daily of that. One of the things we like about this is, again, the long-term uptrend on this weekly chart and when you go to the daily, you can see its nice rebound and out to new highs after August 24, and we like it that the company has a stated goal that it wants to be Nike, so that’s kind of ambition we like to see.
And again, everybody knows Amazon (AMZN). Let's go to the monthly chart on Amazon, and what you see is a long period of months here. Well, Amazon was doing heavy infrastructure investment and doing a lot of the building out of their cloud and their delivery systems and on and on, and investors haven’t been all that happy about how much money Amazon was paying for the future, but it looks to me now, again, a classic blast off on high volume like the future really kind of does go off to Amazon. So, those are couple in retail.
A couple in kind of roughly health, this is HealthEquity (HQY). The whole ObamaCare changeover has forced a lot of medical practices in hospitals that ordinarily would not have gotten heavily computerized. It forced them to use new software. When we look at the weekly on HQY, you see that for very young stock it was just blasting along well, and if I go back to the daily chart, it has come up some after August 24, but again this is long-term story with high potential.
Here's one that I think is pretty new. This is Planet Fitness (PLNT). I would say there are disruptive force in the gym and workout center business, and Planet Fitness is still rather small so the chart kind of looks like the dogs dinner right now, but it's also a cookie kind of story which we like, and the company will build revenues by building more locations. So, we got this one to keep an eye on.
Chipotle Mexican Grill (CMG), again, to get a clearer picture, go back to the weekly. This is a long-term success story and has been basically flat for a long time even as the company continues to build out restaurants. They're nowhere near saturation on locations.
I know we've talked about this, Zoe's Kitchen (ZOES), a kind of Mediterranean flavors and Southern hospitality they say, and we like the story. The food seems to be enormously popular and they're being very responsible. They're not loading themselves up with debt in order to open new locations so I like that one.
And then Ulta Beauty (ULTA), again, the weekly chart says they've been going up for a long time. Daily, they haven’t staged a huge rebound from August 24, but did come up nicely and they are flat right here with still lots of locations to open up.
So, that’s it for this week. If you are not doing anything next Wednesday at 1 o'clock Eastern time, I'm going to be doing the webinar called "The Lunch with the Analyst. I'll basically be doing what I've done here—kind of checking up on the market and I'll also be taking questions from the webinar participants. If you'd like to find out about this, you can go to www.cabot.net. So, thanks for watching and we'll see you next week.