Major Markers

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It’s been 13 years since the Nasdaq traded at 4,000. Not coincidentally, lots of bubble talk is brewing. The market can remain irrational longer than you can remain solvent, once said John Maynard Keynes.  

At the same time, it’s these round numbers that serve as magnets for price action, and very often create turbulence once hit. The VIX is cruising near its lows, which means it’s near certain we’ll see some selling somewhere a midst all this complacency. 

The bigger question, as always, is when?

Backwards, Forwards

Here we have a collection of companies with 5-year past sales growth of 30% or more and 5-year projected EPS growth of 30% or more. We added a qualifier of positive ROE to weed out the weak.

What we see are solid names that are not coincidentally analyst favorites. We’d prefer getting in on these before the Wall Street crowd. Though it’s good to know where future fund flows will likely go. 

Ticker Company Sector Industry Country
ACOR Acorda Therapeutics, Inc. Healthcare Biotechnology USA
ADES ADA-ES, Inc. Industrial Goods Pollution & Treatment Controls USA
AMZN Amazon.com Inc. Services Catalog & Mail Order Houses USA
ANGI Angie’s List, Inc. Technology Internet Software & Services USA
BCEI Bonanza Creek Energy, Inc. Basic Materials Independent Oil & Gas USA
BRFS BRF – Brasil Foods S.A. Consumer Goods Meat Products Brazil
CFX Colfax Corporation Industrial Goods Diversified Machinery USA
CLR Continental Resources Inc. Basic Materials Independent Oil & Gas USA
FB Facebook, Inc. Technology Internet Information Providers USA
GGAL Grupo Financiero Galicia S.A. Financial Foreign Regional Banks Argentina
HTHT China Lodging Group, Limited Services Lodging China
KOG Kodiak Oil & Gas Corp. Basic Materials Oil & Gas Drilling & Exploration USA
LNKD LinkedIn Corporation Technology Internet Information Providers USA
OAS Oasis Petroleum Inc. Basic Materials Independent Oil & Gas USA
REGN Regeneron Pharmaceuticals, Inc. Healthcare Biotechnology USA
TNGO Tangoe, Inc. Technology Business Software & Services USA
TPLM Triangle Petroleum Corporation Basic Materials Independent Oil & Gas USA
UBNT Ubiquiti Networks, Inc. Technology Wireless Communications USA
WETF WisdomTree Investments, Inc. Financial Asset Management USA
YNDX Yandex N.V. Technology Internet Information Providers Netherlands

Victories And Bitch Slaps

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New highs for the major indexes serve just as much as victories to Bulls as they do bitch slaps to bears. 

Odds are a good number of aggressive funds and traders are sitting on short positions, especially after evidence of last week’s solid distribution day. 

We’ve still held on to our Buyer’s Caution bias, as we have all year, waiting for something more convincing, rather than acting aggressive. 

Meanwhile, loads of top growth names have confirmed the Bull’s cause with fresh all time highs.

Bam 3D Pow!

Following up on our post in August, the breakout on 3D Systems Corp. (DDD) thrives as it nears climax like trajectory. 

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Conservative money management takes a profit with half a position at 20% and lets the other half ride until evidence of institutional selling or tiredness sets in. 

We first posted on this as a potential breakout about a year ago: http://gsrtrades.com/growthstocks/3d-breakout/

Honking Validation

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Thursday’s rush to the exits by institutions backs up our short-term call for a pullback. 

Watch and wait. Punctuation marks like these at the end of bull legs can last anywhere from a day to weeks and months, if not years. Odds are the major indexes will test their 50-day moving averages. We’re not trying to make grand statements about the long-term direction of the market. We’re driving a car, and paying very close attention to the road as it winds before our eyes. 

More heavy selling will keep us cautious. Only a significant deterioration of market leadership and key sectors falling convincingly below their major moving averages would make us outright bears.   

These pullback/corrections are great litmus tests that separate strong growth stocks from weak ones. 

High Expectations

This week we’re looking at growth potential as we’ve narrowed the field down to only those companies with projected EPS growth of at least 30%. We narrowed the list further by screening for a minimum of 50% return on equity to limit it to only the sturdiest.

While the fundamentals look bright, none have the technical patterns to suggest low risk entries. Stay tuned.  

Ticker Company Sector Industry Country
ADES ADA-ES, Inc. Industrial Goods Pollution & Treatment Controls USA
ANGI Angie’s List, Inc. Technology Internet Software & Services USA
ASMI ASM International NV Technology Semiconductor Equipment & Materials Netherlands
ATHL Athlon Energy Inc. Basic Materials Independent Oil & Gas USA
FEYE FireEye, Inc. Technology Application Software USA
GMK Gruma S.A.B. de CV Consumer Goods Processed & Packaged Goods Mexico
GT Goodyear Tire & Rubber Co. Consumer Goods Rubber & Plastics USA
HOLL Hollywood Media Corp. Services Specialty Retail, Other USA
MAS Masco Corporation Industrial Goods General Building Materials USA
NPSP NPS Pharmaceuticals, Inc. Healthcare Biotechnology USA
NTI Northern Tier Energy LP Basic Materials Oil & Gas Refining & Marketing USA
RNG RingCentral, Inc. Technology Application Software USA
RYL Ryland Group Inc. Industrial Goods Residential Construction USA
TIVO TiVo Inc. Services CATV Systems USA
UBNT Ubiquiti Networks, Inc. Technology Wireless Communications USA
WETF WisdomTree Investments, Inc. Financial Asset Management USA
YY YY Inc. Technology Internet Information Providers China

Holding On

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Our bias remains at Buyer’s Caution, as it has all year.

However, we’ve noted several reasons to expect the market is primed for another short-term pullback/correction. Increased volume with modest price advancement and an outright distribution day Thursday tell us funds are taking some off the table at the new high levels for the major indexes. We’re also seeing some key leaders stumble.  

Our bias will remain at Buyer’s Caution until we see evidence of more significant decay. For those who ask why we’ve never went into a full Buyer’s Edge bias, it’s because the bull has been partially fueled from the effects of quantitative easing, which means the Fed controls the throttle, leaving our analysis quite vulnerable unlike previous bull markets.