Why Stocks Could Be Ready To Rally


It’s been a painful week for growth investors given significant declines in technology-oriented indexes and exchange traded funds. The NASDAQ 100 ETF (QQQ) fell over 11% from its intraday high this month to its intraday low this week, and returns were worse for software investors given the iShares Expanded Tech-Software Sector ETF (IGV) 12.5% drop from its month-to-date high to low point.

Source: Top Stocks for Tomorrow.

Many individual stocks fared worse. For example, high-flying Tesla (TSLA) lost over one-third of its value and Zoom (ZM), Wayfair (W), and Shopify (SHOP) declined by over twenty five percent.

Since many of the baskets and individual stocks that fell most were also those most extended to their 200-day moving average, it isn’t surprising they took the brunt of the sell-off.

Source: Top Stocks for Tomorrow.

However, our overbought indicator is still extended with over 50% of our 1,500 stock universe trading 5% or more above its 200-day moving average.

Historically, readings above 50% have preceded significant corrections, including the one we experienced this week and ideally, a correction would normalize this reading in the 20% to 40% range. Since we’re still north of 50%, it’s hard to argue all the pain has been felt when it comes to individual stocks.

The market itself could be finding its footing, though. Volatility can remain elevated for weeks following a 3% one-day decline in the S&P 500, but the market usually trades higher at some point within 30-days. In my experience, picking bottoms is more art than science, so it’s best to focus on ranges and be flexible. Ideally, I’d like to see a retest of this week’s intraday low followed by a heavy volume reversal day for confirmation, but as I said, flexibility is key. Many leading stocks may officially bottom before the market, so selectively buying leaders could be the best approach for investors.

Overall, it’s too soon to declare every stock has found its footing, but using down days to buy leaders in strong sectors and industries could be savvier than indiscriminately selling at this point. It’s far easier to proactively and non-emotionally prune portfolios into strength, than weakness, so the best time to raise cash was when we recommended doing it in August, not today.

Top-rated sectors now

Weekly, we rank major sectors so members can see which baskets have alpha-friendly tailwinds. It also helps investors spot emerging positive or negative trends. For example, consumer goods — a defensive group — strengthened throughout August as technology weakened, adding conviction to thinking the market was due for a correction.

Currently, industrials, services, consumer goods, financials and technology are the best ponds to fish in large cap. The top mid-cap sectors are consumer goods, services, and basic materials, while basic materials, services, consumer goods, and industrials are best in small cap.

Because utilities and energy stocks remain weak across all market caps, it’s best to focus elsewhere for stocks to buy.

Source: Top Stocks for Tomorrow.

It can also be useful to track sector strength by market cap. For instance, large-cap industrials score better than small cap industrials, and small-cap basic materials scores higher than large-cap basic materials.

Source: Top Stocks for Tomorrow.

The strongest-scoring stocks now

Our scores provide a systematic and objective way to rank over 1,500 high-quality stocks. Weekly, we run every stock in our universe through a 7-factor gauntlet explained more here. Overall, our model assigns scores based on the following factors:

  • Forward earnings growth expectations
  • Historical trends in reporting earnings that beat Wall Street estimates
  • Insider buying
  • Short-term and long-term institutional money flow
  • Forward valuation relative to historical valuation
  • Contra-trend short interest analysis
  • Quarterly seasonality over the past decade

Because stock prices follow earnings over time, insiders buy for one reason; money flow reflects institutional sentiment, and seasonal patterns can rhyme, high-scoring stocks offer a solid source of new ideas.

This week, over 100 top-rated stocks were shared with members, including these 80 stocks. I’ve highlighted the stocks seeing the biggest increase in score for convenience.

Best Scoring 9/10/2020 4 WEEK MA
Company Name Symbol Sector INDUSTRY SCORE SCORE
BASIC MATERIALS
Enviva Partners, LP (EVA) BASIC MATERIALS LUMBER & WOOD PRODUCTION 105 107.5
The Sherwin-Williams Company (SHW) BASIC MATERIALS SPECIALTY CHEMICALS 100 98.75
Cleveland-Cliffs Inc. (CLF) BASIC MATERIALS STEEL 90 88.75
The Scotts Miracle-Gro Company (SMG) BASIC MATERIALS AGRICULTURAL INPUTS 90 92.5
Air Products and Chemicals, Inc. (APD) BASIC MATERIALS CHEMICALS 85 83.75
FMC Corporation (FMC) BASIC MATERIALS AGRICULTURAL INPUTS 85 81.25
Compass Minerals International, Inc. (CMP) BASIC MATERIALS OTHER INDUSTRIAL METALS & MINING 85 82.5
Ferro Corp (FOE) BASIC MATERIALS SPECIALTY CHEMICALS 85 83.75
CONSUMER GOODS
Wolverine World Wide, Inc. (WWW) CONSUMER GOODS FOOTWEAR & ACCESSORIES 115 108.75
Simply Good Foods (SMPL) CONSUMER GOODS PACKAGED FOODS 110 108.75
Fox Factory Holdings (FOXF) CONSUMER GOODS RECREATIONAL VEHICLES 105 106.25
Constellation Brands, Inc. (STZ) CONSUMER GOODS BEVERAGES 100 93.75
Archer-Daniels-Midland Company (ADM) CONSUMER GOODS FARM PRODUCTS 95 92.5
Bunge Limited (BG) CONSUMER GOODS FARM PRODUCTS 95 87.5
Newell Brands Inc. (NWL) CONSUMER GOODS HOUSEHOLD & PERSONAL PRODUCTS 95 90
The Procter & Gamble Company (PG) CONSUMER GOODS HOUSEHOLD & PERSONAL PRODUCTS 95 98.75
National Beverage Corp. (FIZZ) CONSUMER GOODS BEVERAGES 95 98.75
The Hain Celestial Group, Inc. (HAIN) CONSUMER GOODS PACKAGED FOODS 95 91.25
FINANCIALS
Aon plc (AON) FINANCIALS INSURANCE BROKERS 105 91.25
Bank of Montreal (BMO) FINANCIALS BANKS-DIVERSIFIED 100 91.25
Brown & Brown, Inc. (BRO) FINANCIALS INSURANCE BROKERS 100 101.25
FactSet Research Systems Inc. (FDS) FINANCIALS FINANCIAL DATA & STOCK EXCHANGES 100 98.75
Marsh & McLennan Companies, Inc. (MMC) FINANCIALS INSURANCE BROKERS 100 97.5
Assurant, Inc. (AIZ) FINANCIALS INSURANCE-SPECIALTY 100 100
Eaton Vance Corp. (EV) FINANCIALS ASSET MANAGEMENT 95 82.5
Intercontinental Exchange, Inc. (ICE) FINANCIALS FINANCIAL DATA & STOCK EXCHANGES 95 98.75
Royal Bank of Canada (RY) FINANCIALS BANKS-DIVERSIFIED 95 93.75
Sun Life Financial Inc. (SLF) FINANCIALS INSURANCE-DIVERSIFIED 95 95
HEALTHCARE
Dr. Reddy’s Laboratories Limited (RDY) HEALTHCARE DRUG MANUFACTURERS 100 96.25
Medpace Holdings, Inc. (MEDP) HEALTHCARE DIAGNOSTICS & RESEARCH 100 105
LeMaitre Vascular, Inc. (LMAT) HEALTHCARE MEDICAL INSTRUMENTS & SUPPLIES 100 101.25
Alexion Pharmaceuticals, Inc. (ALXN) HEALTHCARE BIOTECHNOLOGY 95 85
Amgen Inc. (AMGN) HEALTHCARE DRUG MANUFACTURERS 95 86.25
DexCom, Inc. (DXCM) HEALTHCARE DIAGNOSTICS & RESEARCH 95 97.5
Edwards Lifesciences Corporation (EW) HEALTHCARE MEDICAL DEVICES 95 98.75
Merck & Co., Inc. (MRK) HEALTHCARE DRUG MANUFACTURERS 95 93.75
Penumbra, Inc. (PEN) HEALTHCARE MEDICAL DEVICES 95 96.25
Inspire Medical Systems, Inc. (INSP) HEALTHCARE MEDICAL DEVICES 95 98.75
INDUSTRIALS
Trinity Industries, Inc. (TRN) INDUSTRIALS RAILROADS 110 100
Arconic (ARNC) INDUSTRIALS SPECIALTY INDUSTRIAL MACHINERY 100 96.25
BWX Technologies, Inc. (BWXT) INDUSTRIALS AEROSPACE & DEFENSE 100 77.5
Emerson Electric Co. (EMR) INDUSTRIALS INDUSTRIAL EQUIPMENT & COMPONENTS 100 98.75
Old Dominion Freight Line, Inc. (ODFL) INDUSTRIALS TRUCKING 100 103.75
Republic Services, Inc. (RSG) INDUSTRIALS WASTE MANAGEMENT 100 98.75
The Middleby Corporation (MIDD) INDUSTRIALS DIVERSIFIED MACHINERY 100 101.25
Kforce Inc. (KFRC) INDUSTRIALS STAFFING & EMPLOYMENT SERVICES 100 95
AMETEK, Inc. (AME) INDUSTRIALS INDUSTRIAL ELECTRICAL EQUIPMENT 95 97.5
Deere & Company (DE) INDUSTRIALS FARM & CONSTRUCTION MACHINERY 95 93.75
Illinois Tool Works Inc. (ITW) INDUSTRIALS DIVERSIFIED MACHINERY 95 97.5
REITS
Iron Mountain Incorporated (IRM) REITS REIT-SPECIALTY 90 88.75
Prologis, Inc. (PLD) REITS REIT-INDUSTRIAL 85 86.25
CorePoint Lodging Inc. (CPLG) REITS REIT-HOTEL & MOTEL 85 67.5
Independence Realty Trust, Inc. (IRT) REITS REIT-RESIDENTIAL 85 65
Equinix, Inc. (REIT) (EQIX) REITS REIT-SPECIALTY 80 81.25
Global Net Lease, Inc. (GNL) REITS REIT-OFFICE 80 82.5
Monmouth Real Estate Investment Corporation (MNR) REITS REIT-INDUSTRIAL 80 81.25
PennyMac Mortgage Investment Trust (PMT) REITS REIT-MORTGAGE 80 80
SERVICES
Churchill Downs (CHDN) SERVICES GAMBLING 110 112.5
Americas Car Mart (CRMT) SERVICES AUTO & TRUCK DEALERSHIPS 105 102.5
Group 1 Automotive, Inc. (GPI) SERVICES AUTO & TRUCK DEALERSHIPS 105 102.5
Equifax Inc. (EFX) SERVICES CONSULTING SERVICES 100 101.25
Vail Resorts, Inc. (MTN) SERVICES RESORTS & CASINOS 100 93.75
GameStop Corp. (GME) SERVICES SPECIALTY RETAIL 100 100
Booz Allen Hamilton Holding Corporation (BAH) SERVICES CONSULTING SERVICES 95 98.75
Brunswick Corporation (BC) SERVICES LEISURE 95 96.25
CarMax, Inc. (KMX) SERVICES AUTO & TRUCK DEALERSHIPS 95 97.5
Comcast Corporation (CMCSA) SERVICES ENTERTAINMENT 95 98.75
TECHNOLOGY
Fortive Corp (FTV) TECHNOLOGY SCIENTIFIC & TECHNICAL INSTRUMENTS 105 103.75
Black Knight, Inc. (BKI) TECHNOLOGY SOFTWARE-INFRASTRUCTURE 100 103.75
Guidewire Software, Inc. (GWRE) TECHNOLOGY SOFTWARE-APPLICATION 100 98.75
Open Text Corporation (OTEX) TECHNOLOGY SOFTWARE-APPLICATION 100 102.5
Palo Alto Networks, Inc. (PANW) TECHNOLOGY SOFTWARE-INFRASTRUCTURE 100 100
Verizon Communications Inc. (VZ) TECHNOLOGY TELECOM SERVICES 100 91.25
Coupa Software Incorporated (COUP) TECHNOLOGY SOFTWARE-APPLICATION 100 103.75
Fastly, Inc. (FSLY) TECHNOLOGY SOFTWARE-APPLICATION 100 102.5
Gogo Inc. (GOGO) TECHNOLOGY TELECOM SERVICES 100 88.75
ANSYS, Inc. (ANSS) TECHNOLOGY SOFTWARE-APPLICATION 95 98.75
UTILITIES
Brookfield Infrastructure Partners L.P. (BIP) UTILITIES UTILITIES-DIVERSIFIED 90 81.25
Brookfield Renewable Partners L.P. (BEP) UTILITIES UTILITIES-RENEWABLE 85 88.75
CenterPoint Energy, Inc. (CNP) UTILITIES UTILITIES-REGULATED GAS 85 82.5

Never miss a money-making idea. Get all the ideas we sent to members this week, plus weekly large cap, mid cap, small cap and ADR rankings. Know what sectors, industries, and stocks to buy and when to buy them. Over 400 bps of excess return in the following 52 weeks since 2017. Free trial, special introductory pricing, and you can cancel anytime. Join the conversation. Sign up for Top Stocks For Tomorrow.

Disclosure: I am/we are long IGV, TSLA, SHOP, ZM, AAPL, AMGN, DXCM, INSP, FSLY. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.





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Asian shares set to rise on broader U.S. rally, dollar gains By Reuters


© Reuters. People wearing protective masks, following the coronavirus disease (COVID-19) outbreak, are reflected on a screen showing stock prices outside a brokerage in Tokyo

By Alwyn Scott

NEW YORK (Reuters) – Asian equities were set to open higher on Thursday after stronger U.S. economic data and the prospect of additional U.S. stimulus prompted sharp, and broader, gains on Wall Street, while the dollar extended its upward move.

Investors in Asia await readings on services activity in China and Japan, which are expected to show continued expansion in China, and possibly a move out of contraction for Japan.

Australian S&P/ASX 200 futures rose 0.69% in early trading.

{{178|Japan’s Ni added 0.04%.

Hong Kong’s futures lost 0.15%.

E-mini futures for the S&P 500 fell 0.10%.

The positive sentiment will be helped by the U.S. shift toward lagging sectors.

“Equity bulls will love the fact that the (U.S.) market was up quite strongly” on Wednesday, rather than selling off on higher real bond yields and a stronger dollar, said Chris Weston, Head of Research at the Pepperstone Group.

“People just used that to reweight toward value areas of the market,” he said. “Value effectively took over.”

On Wall Street, the three major equity indexes moved higher, but gains were led by defensive sectors such as utilities as the high-flying tech sector paused.

New data on Wednesday showed U.S. private employers hired fewer workers than expected for a second straight month in August, suggesting that the labor market recovery was slowing as the coronavirus pandemic persists and as government money to support workers and employers dries up.

Sluggish job growth also emerged in the Federal Reserve’s Beige Book, which showed furloughed workers increasingly being laid off permanently in some parts of the United States.

A separate report showed factory orders rose more than expected in July, pointing to continued improvement in the manufacturing sector.

The mixed data may have added to expectations for Washington to reach a deal on new stimulus to counteract the pandemic.

The rose 454.84 points, or 1.59%, to 29,100.5, the S&P 500 gained 54.19 points, or 1.54%, to 3,580.84 and the added 116.78 points, or 0.98%, to 12,056.44. The climb marked the biggest daily percentage gain for the S&P since July 6.

The dollar strengthened against a basket of major currencies for a second straight day from lows of more than two years, while the euro pulled back from the key $1.20 level reached in the prior session.

The rose 0.454%, with the euro down 0.02% to $1.1851.

The Japanese yen weakened 0.03% versus the greenback at 106.22 per dollar, while Sterling was last trading at $1.335, down 0.01% on the day.

For a graphic on tumbles:

https://fingfx.thomsonreuters.com/gfx/mkt/jznvnxnojvl/rouble.PNG

Benchmark 10-year notes last traded to yield 0.6477%.

In commodities, oil retreated as weekly government data showed U.S. gasoline demand fell in the latest week, an indication that economic recovery from the pandemic may be slower than expected.

settled down 2.92% at $41.51 per barrel and was at $44.43, down 2.52% on the day.





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Dow Rides Rally as Defensive Names Shine on Private Jobs Wobble By Investing.com


© Reuters.

By Yasin Ebrahim

Investing.com – The Dow jumped on Wednesday, as defensive concerns of the market like utilities and consumer staples got a chance to shine amid data showing the U.S. economy created fewer than expected private jobs last month.  

The rose 1.08%, or 308 points, the added 1.17%, and  the gained 0.74%.

In a sign that investors could be worried that the run-up in growth stocks like tech is nearing a top, utilities were among the biggest gainers, led by a more than 3% jump in Exelon (NASDAQ:) and PPL (NYSE:).

Consumer staples were not far behind thanks to a more than 4% rise in Coca-Cola Company (NYSE:) and 9% jump in whiskey maker Brown Forman (NYSE:).

Brown Forman reported first-quarter fiscal first-quarter earnings of 67 cents on revenue of $753 million, topping estimates for earnings of 39 cents a share, on revenue of $691.2 million.

Technology lagged the broader move higher as Apple (NASDAQ:) eased 2%, though still remains up about 80% for the year so far. Shares of Apple have been underpinned by growing investor optimism over its upcoming launch of the iPhone 12, which many Wall Street analysts expect will spark a wave of upgrades.

Energy, meanwhile, continued its sluggish start to the week on falling oil prices despite data showing a larger-than-expected 9.3 million barrel draw in weekly stocks.

On the economic front, investors digested data showing the U.S. economy created 428,000 private jobs last month, well short of estimates of 950,000.

“ADP’s measure has undershot the official estimate of private payrolls in recent months, but the error diminished sharply in both June and July.  Assuming a further narrowing of the gap in August, we expect Friday’s official headline print to be about 750,000,” Pantheon Macroeconomics said.

Still, the somber jobs report did little to cool expectations for a strong economic recovery at a time when consumer spending continues to gather steam.

“Consumer spending continued to pick up, sparked by strong vehicle sales and some improvements in tourism and retail sectors, according to the Fed’s said in its Beige Book report. 

In other news, Tesla (NASDAQ:) fell more than 6% after its largest outside shareholder, Baillie Gifford, cut some of its holdings in the company, citing portfolio restrictions in the wake of the massive run higher in the stock. 

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.





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Bigcommerce Gets Reality Check from Morgan Stanley after Rally By Investing.com


© Reuters.

By Christiana Sciaudone

Investing.com —   Bigcommerce Holdings sank 15% after analysts initiated coverage without much enthusiasm. 

The stock is trading around $109.30, down 24% since hitting a high last week. 

Morgan Stanley (NYSE:) rated the stock underweight with a price target of $52, saying that the stock’s valuation implies “highly elevated levels of growth and present meaningful downside risk if results do not meet expectations,” Morgan Stanley’s Stan Zlotsky wrote, according to Seeking Alpha. Morgan Stanley was the lead underwriter on BigCommerce’s IPO. 

The company’s initial public offering priced at $24 on Aug. 4, and shares reached a peak of $141 on Aug. 27. 

Truist initiated Bigcommerce with a hold rating and a $132 price target, and Raymond James gave it a market perform rating, also on valuation, and did not set a price target, The Fly reported. 

Raymond James’s Brian Peterson also cited valuation, noting that shares are trading at 65 times estimated 2021 revenue. He recommends waiting for a more attractive entry point. 

Truist’s Terry Tillman had a more positive take on Bigcommerce. The company can sustain improved sales growth given its “differentiated open SaaS ecommerce platform, investments and market share gains, The Fly said. 

The continued move away from physical stores and toward e-commerce could drive higher gross merchandise value trends, Tillman said. 

 

    

 

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.





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Wall Street’s ‘fear gauge’ climbs despite U.S. stock rally By Reuters


© Reuters. FILE PHOTO: The “Fearless Girl” statue is seen outside the New York Stock Exchange

By April Joyner

NEW YORK (Reuters) – U.S. stocks are rallying, but so too is Wall Street’s “fear gauge,” in an unusual twist.

The Cboe Volatility Index () was set for a second week of gains, despite a drop on Friday, even as the benchmark S&P 500 () has climbed nearly 3% for the week. That is a departure from typical activity, in which the VIX falls as stocks rise.

Yet steep climbs higher can also contribute to greater volatility. The S&P 500 is on track for nearly a 7% monthly gain, exceeding the expectations priced into options, said Christopher Murphy, co-head of derivatives strategy at Susquehanna Financial Group. The steady rise in stocks has spurred purchases of upside calls on the benchmark index, which in turn are lifting the VIX.

“Just because (the S&P 500) is up doesn’t mean there isn’t volatility,” Murphy said.

Federal Reserve Chair Jerome Powell’s remarks regarding the central bank’s approach to inflation also likely prompted call buying, said Matt Thompson, managing partner at options firm Thompson Capital Management.

The Fed will now aim for 2% inflation on average, so that periods of too-low inflation would likely be followed by an effort to lift inflation moderately above that level. As a result, the central bank is likely to keep rates near zero, thereby supporting equities.

“That gave the green light to put bets on the upside,” Thompson said.

Longer-term, however, downside concerns for the overall market may also keep the VIX bid up. Some investors have pointed to concerns that a narrow group of tech-related stocks such as Apple Inc (O:) and Amazon.com Inc (O:) is leading the S&P 500 higher, prompting concerns about any slides in their performance. Moreover, VIX futures point to elevated volatility expectations around the U.S. presidential election on Nov. 3.

“If election volatility stays at that level, you could see the VIX marching higher,” Murphy said.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.





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