Author: Raj Gupta

Raj Gupta is Director, Research Analyst. After joining the firm in 2002 as a research analyst, Raj was appointed senior equity analyst in 2006, and lead senior equity analyst in 2014—largely because of his ability to select outperforming stocks. He acts as an expert in the O’Neil Methodology and contributes to the direction of product and service line development. He recommends securities for addition to or removal from the U.S. Focus List, or USFL, and the associated alerts to clients. During his tenure, he was part of the leadership that developed the Global Focus List, which marked the firm’s successful expansion into international equity recommendations. He is also a lead on the IPO Rewind report and contributes to weekly summaries on the performance of the U.S. market. Much of his expertise is delivered as highly customized service to clients. RAj earned his Bachelor’s degree in Economics from the University of California, Santa Barbara. He began working at the firm directly out of college, driven by his passion for investing and stocks. An avid soccer player, he built and managed an adult league in the Los Angeles area, in which he still plays. He also enjoys international travel; he and his wife commit to at least one major adventure a year.

Market View

Posted on by Raj Gupta

U.S. Market

The U.S. market remains in a Confirmed Uptrend. The S&P 500 and Nasdaq held support at their respective 21-
DMA this week before closing at the highs of the session on Friday. Positively, both indices avoided distribution
with the distribution day count falling to just one and three days, respectively. We have yet to see a clustering of
distribution days, and leading ideas continue to trade constructively above support.
Following a short three-week period of consolidation, long-term leading sectors, Technology and Retail, rallied
back to all-time highs, rising 2–4% each. Long-term lagging sectors, Energy and Capital Equipment, failed to
rally above short-term moving average resistance, falling 1–4% each. Energy is the only sector trading below its
50-DMA. Top-ranked industry groups leading this week include Internet, Semiconductors, Software, Leisure
Products, Home Furnishings, Miners, Building Products, and Medical Equipment. 64% of S&P 500 stocks are
trading above their respective 50-DMA and 51% are trading above their respective 200-DMA, compared with
74% and 53%, respectively, last week.

Market View

Posted on by Raj Gupta

U.S. Market

The U.S. market remains in a Confirmed Uptrend. The S&P 500 and Nasdaq pulled back off early-week gains,

however, both managed to close off lows and keep a relatively low distribution day count. Further, two distribu-
tion days will expire on the S&P 500 and one on the Nasdaq next week. Extended leadership is in the process of

basing, but thus far, the majority have constructively held support rather than breaking down in concerning fash-
ion. Should weakness persist, we will be looking for both indices to close above their respective rising 50-DMA

(S&P 500: 3,104; Nasdaq: 9,933) to remain constructive.

Health Care – Actionable U.S. Focus List Ideas

Posted on by Raj Gupta

Key points from this report:

 

  • The Spdr Health Care ETF ( XLV ) has broken out to new highs.After consolidating for three months above support, the index has broken out of a 25-week consolidation with an RS line rising again.
    • IBB (Biotech) is trending into new highs with support off its 50-DMA.
    • IHI (Med Devices) broke out to new highs last week in heavy volume.
    • IHF (Managed Care) is still lagging the overall sector but continues to hold above key levels of technical support.
    • The William O’Neil + Co. U.S. Focus List has 15 health care ideas (~20% of the list). Bolded ideas are highlighted in the attached report.
      • Biotech: NBIX, PCRX, VRTX
      • Pharma: ABBV, LLY, ZTS
      • Managed Care: CNC, UNH
      • Medical Equipment/Diagnostics: ABT, DHR, ILMN, ISRG, NEO, PKI, RMD.

Market View

Posted on by Raj Gupta

The U.S. market is in a Confirmed Uptrend. The S&P 500 and Nasdaq remain resilient and are holding above their respective 10-DMA despite Monday’s downside reversal. The S&P 500 is less than 1% below resistance at 3,233 and remains in a six-week consolidation. The distribution day count declined this week and currently stands at four days on the S&P 500 and two days on the Nasdaq.

 

The Health Care, Industrial, and Material sectors outperformed this week, rising more than 4.5%, while long-term leading sectors Technology (-1.7%) and Retail (-1.3%) underperformed. Health Care (XLV) broke out to new highs as 13 of 15 Health Care industry groups, including Research Equipment, Products, and Supplies, within the O’Neil 197 improved in rank over the trailing five sessions. Top-ranked industry groups outperforming this week include Solar, Building Products, Medical Supplies, Building Mobile, Retail Automobile, Medical-Research Equipment, Trucks, Logistics, Leisure Products, and Home Furnishing. 78% of S&P 500 stocks are trading above their respective 50-DMA and 52% are trading above their respective 200-DMA, compared with 62% and 41%, respectively, last week.

 

Indices remain in a Confirmed Uptrend despite a small but constructive pullback in leaders and slight rotation into laggard groups. Monitor extended leaders closely for additional distribution and continue to focus on new ideas emerging out of sound bases with RS line rising or at new highs.

Market View

Posted on by Raj Gupta

The U.S. market is in a Confirmed Uptrend. The S&P 500 held support along its 21-DMA this week before rallying and closing right at resistance along its downward trending channel line. The next level of resistance is 3,233. The Nasdaq continues to constructively trend within a channel, which is rising into 11,000. Near-term support for both indices remains the 10- and 21-DMA. Distribution now stands at five and two days, respectively, with two days expiring on the S&P 500 and one on the Nasdaq next week.

 

Retail, Consumer Cyclical, and Technology led by a wide margin this week, rising 3–6% each. On Friday, however, we saw the first signs of potential rotation as lagging sectors, including Energy and Financial, rallied at the expense of long-term leading sectors, Technology and Health Care. Positively, the majority of lagging sectors have been able to make higher lows, holding logical support despite severely underperforming Technology. A broadening of leadership will be necessary in order for the S&P 500 to break out of this one-month choppy trading range. Top-ranked industry groups outperforming this week include Solar, Internet, Software, Semiconductors, Internet, Trucks, and Medical Equipment. Friday’s biggest gainers came from lagging industry groups such as Oil & Gas, Airlines, Banks, and Steel. 62% of S&P 500 stocks are trading above their respective 50-DMA and 41% are trading above their respective 200-DMA. This compares with 69% and 42%, respectively, last week.

 

We continue to recommend a selective approach to increasing risk. Buy fundamentally sound stocks that are setup constructively within bases, trim ideas that have become overly extended from major moving averages, and avoid lagging ideas trading below their respective 50- and 200-DMA.

Market View

Posted on by Raj Gupta

The U.S. market remains in an Uptrend Under Pressure. The S&P 500 and Nasdaq held 50- and 21-DMA support, respectively, this week. The Nasdaq moved back into all-time highs, but on Thursday reversed to close at the lows of the session and below last week’s intraday high. The S&P 500 remains the lagging index and still needs to convincingly clear above resistance between 3,155 and 3,233. With that said, the 50- and 200-DMA have converged just above 3,000, which should offer a strong level of support on any pullback. Distribution was unchanged this week, holding at six and three days, respectively, with one day expiring on each next week.

 

Utility, Consumer Cyclical, Basic Material, and Retail rallied by ~3–4% over the last five days, while Financial and Energy lagged, trading relatively flat. Five sectors are now above their respective 200-DMA, up from three last week, while all but Energy are trading above their respective 50-DMA. Top-ranked industry groups outperforming this week include Software, Internet, Education, Advertising, Medical Equipment, Mining, and Transportation Logistics. 69% of S&P 500 stocks are trading above their respective 50-DMA and 42% are trading above their respective 200-DMA. This compares with 47% and 33%, respectively, last week as multiple sectors held support.

 

The market is rated Uptrend Under Pressure largely due to a depressed and choppy S&P 500 index that is also carrying six distribution days. Despite this rating, leading ideas have yet to falter and remain exceptionally strong. Original leaders continue to trend into higher highs, while new ideas have begun to surface from constructive bases. Therefore, we continue to recommend a selective approach to increasing risk, focusing on high-quality, high relative strength ideas that are approaching new pivots or breaking out from proper bases.

Market View

Posted on by Raj Gupta

The U.S. market shifted back to an Uptrend Under Pressure. Though we did have to briefly move back to a Confirmed Uptrend intraweek as the Nasdaq made a new high, our overall recommendation never changed given severe sector divergence. After briefly making a new high on Tuesday, the Nasdaq quickly retraced that move to close below its 21-DMA for the first time since April. The S&P 500, which never fully resolved the June 11 selloff, closed back below its 200-DMA on Friday. Both indices added a distribution day, taking the count to six and three days, respectively, with no expiration next week. We will now be looking for both indices to hold support at their respective rising 50-DMA (S&P 500: 2,980; Nasdaq: 9,299) next week.

 

Lagging sectors took the brunt of the selling this week with Capital Equipment, Consumer Cyclical, and Energy declining ~4–7% each. Retail and Technology held up best, falling ~1% each. Technology, Retail, and Health Care are the only three sectors trading above their respective 200-DMA. Top-ranked industry groups outperforming this week include Mining, Software, Discount Retail, Internet Retail, Home Furnishings, and Leisure Products. 47% of S&P 500 stocks are trading above their respective 50-DMA and 33% are trading above their respective 200-DMA. This compares with 79% and 41%, respectively, last week as breadth continues to narrow.

 

We continue to recommend a selective approach to increasing risk. We expect choppy action to continue given a still elevated VIX. Overall, sloppy index action caused by depressed value-oriented sectors continues to mask strength among leading ideas. There remains a multitude of ideas trending into higher highs or basing constructively above logical levels of support. With that said, lagging sectors, groups, and ideas will need to find support and push back higher in order for the S&P 500 and Nasdaq to remain above their respective 50-DMA. A further significant break and close lower will result in another volatility spike and further technical damage that will take time to repair. Remain patient, focusing on those ideas holding constructively within bases and showing good near-term relative strength. Selectively add risk only in high-quality ideas at proper entry points, while avoiding/trimming ideas that are breaking below logical levels of support.

Neurocrine Biosciences

Posted on by Raj Gupta

Key points from this report:

 

  • Add to NBIX positions on a pullback to the rising 10-DMA:  The stock is slightly extended from its pivot range following a heavy volume move into new highs last week. Buy on constructive pullbacks to the rising 10-DMA.
  • Collaboration with Takeda for psychiatry pipeline: Neurocrine has begun multiple initiatives to expand their clinical pipeline and reduce dependence on a single drug, Ingrezza. The company announced a collaboration with Takeda Pharmaceutical (TA@N.JP; TAK) for exclusive worldwide rights to Takeda’s early-to-mid-stage neuropsychiatry-focused products.

Market View

Posted on by Raj Gupta

The U.S. market remains in an Uptrend Under Pressure. The S&P 500 and Nasdaq held support this week, rallying off the 50- and 21-DMA, respectively. Both, however, are still trading within the range of last Thursday’s severe decline and have yet to convincingly take out that level. Distribution held steady until Friday’s triple witching tacked on a fifth day for the S&P 500. The overall count now stands at five and two days, respectively, with one day expiring on the S&P 500 next week.

 

The rally off support has been narrow. Long-term leading sectors, Technology, Retail, and Health Care rallied 3–4% this week, and are the only sectors trading above their respective 200-DMA. Four other sectors, including Transportation and Capital Equipment, rallied less than 1% each after severe price declines last week. Top ranked industry groups outperforming this week include Software, Semiconductors, Internet, Biotech, Medical Equipment, Leisure Products, and Home Furnishings. 79% of S&P 500 stocks are trading above their respective 50-DMA and 41% are trading above their respective 200-DMA. This compares with 82% and 37%, respectively, last week.

 

We continue to recommend a selective approach to increasing risk. Though the market is rated Uptrend Under Pressure, multiple ideas are working. Indices are masking the strength of leadership which has been exceptionally strong with numerous ideas making higher highs or setting up constructively within bases. This is largely due sector divergence, where leading sectors retraced last week’s decline while lagging sectors remain depressed. We believe leadership will again need to broaden in order for indices to push higher. Continue to focus on high quality ideas ideally from leading and/or improving industry groups as they emerge from constructive bases.

Eli Lilly

Posted on by Raj Gupta

Key points from this report:

 

  • BUY LLY; Add to positions as the stock is breaking out of new base in heavy volume: We recommend adding to positions here as the stock is breaking out of a base-on-base formation in the heaviest volume in more than a year.
  • Positive phase 3 Verzenio results, one step closer to label expansion: On June 16, Lilly announced its marketed cancer drug, Verzenio, in combination with standard adjuvant endocrine therapy (ET), met the primary endpoint of invasive disease-free survival and significantly decreased the risk of breast cancer recurrence or death compared with standard adjuvant ET alone. On May 29, Pfizer announced its phase 3 study for Ibrance plus standard adjuvant ET is unlikely to show a statistically significant improvement in the primary endpoint of invasive disease-free survival.
  • Addressable patient population: Label expansion of Verzenio for early-stage breast cancer will expand its addressable patient population by ~50%. In 2019, Verzenio reported revenue of $580M (+127% y/y). Currently, consensus expects Verzenio peak revenue of $2.5B by 2025. Label expansion should provide upside potential for peak revenue estimates.