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 is in a Downtrend. The S&P 500 and Nasdaq gapped down below their respective 50-
DMA this week resulting in a market downgrade. This is the third severe break below that key moving
average over the last several months. The first occurred on May 13 and the second occurred on August 5. What followed was a series of short three-day rallies toward 50-DMA resistance before another
decline. Therefore, despite a strong rally to close the week, it is best to wait for another follow-through
day coupled with a multitude of quality ideas emerging from consolidation before increasing risk.

Market View

Posted on by Raj Gupta

U.S. Market

The U.S. market remains in a Confirmed Uptrend. The S&P 500 pulled back to its 50-DMA this week, closing
just above that key level of support. Despite the pullback, the index is still trading just 2% off all-time highs.
Should the index close below its 50-DMA next week, we will shift the market status to Under Pressure.

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 are testing resistance at or near
all-time highs with four and five distribution days, respectively. One distribution day expires on the S&P 500 next
week and two expire on the Nasdaq. Support remains the rising 21- and 50-DMA on both indices.
Eight of 11 O’Neil sectors are trading 1% or more above their respective 50-DMA, led by Utility, Energy, and
Health Care this week. 142 of 197 O’Neil Industry Groups and ~75% of S&P 500 stocks are also trading above
their respective 50-DMA. Notable moves higher this week came from Solar, Medical Equipment, Home Builders,
and Reits.

Zoetis Update

Posted on by Raj Gupta

Key points:

 

  • Fundamentals intact; hold positions and look to add when right side of base begins to form: We recommend holding ZTS shares despite near-term weakness, while looking to add to positions when the stock begins building the right side of a new base. We believe the stock will hold support around its 100-DMA should it break its 50-DMA. Given an upcoming new product launch, double-digit growth across leading dermatology products, and a new presence in veterinary diagnostics following their 2018 acquisition of Abaxis, we believe Zoetis will continue to beat consensus EPS and raise guidance going forward. Given eight straight quarters of beating consensus (average beat of 7.4%), we believe there is upside to 2020 consensus EPS of $3.97 with the multiple likely remaining between 30x and 35x.
  • Leadership position in $150B animal health industry: The company estimates its addressable market to be $34B, which is expected to have a CAGR of 5-6% to reach $41B by 2022. Growth is driven by increasing need for animal medicine, with 43M more dogs, 18M more cats, and 9M more horses to be treated by 2026. International markets are underpenetrated at 40%, compared with the U.S. at 70%.

Market View

Posted on by Raj Gupta

The U.S. market remains in a Confirmed Uptrend. The S&P 500 is now testing resistance at all-time highs, while
the Nasdaq is trading ~2% below that level. Distribution was unchanged this week at three and five days, respectively, with one expiring on each index on Wednesday. We will be looking for a breakout into new highs in
the coming days, however, to remain constructive on a potential pullback, we will be looking for the major averages to hold above their respective 21- and/or 50-DMA while avoiding any significant pickup in distribution. The
21-DMA is set to cross above the 50-DMA on both indices next week

Market View

Posted on by Raj Gupta

The U.S. market has been moved back to a Confirmed Uptrend. The S&P 500 and Nasdaq are consolidating
gains after gapping above resistance at the 50-DMA. To remain constructive, we would like to see the 50-DMA
serve as support as more high quality ideas emerge from bases. Currently both indices are less than 2% off alltime highs with five distribution days on the Nasdaq and three on the S&P 500.

Market View

Posted on by Raj Gupta

The U.S. market is in an Uptrend Under Pressure. The S&P 500 and Nasdaq are consolidating below their respective 50-DMA after advancing ~2.8% this week. Despite the move higher, we maintain a cautious outlook as
the 50-DMA has consistently been a level of resistance over the last four weeks. The distribution day count
stands at four days on the Nasdaq and three days on the S&P 500

Market View

Posted on by Raj Gupta

The U.S. market is in an Uptrend Under Pressure. The S&P 500 and Nasdaq sold off more than 2.6% after trad-
ing slightly below resistance at the 50-DMA for several sessions. Each index picked up a distribution day, as the

count increased to three days on the Nasdaq and two on the S&P 500. Indices are poised to re-test August 5
lows, which is followed by support at the rising 200-DMA.

The selloff was broad-based as all 11 sectors declined, led lower by Energy (-3.3%), Transportation (-3.2%), Cy-
clical (-3.1%), and Technology (-3.1%). Nine of 11 sectors are trading below their 50-DMA including four—En-
ergy, Cyclical, Transportation, and Heath Care—below their 200-DMA. Of S&P 500 constituents, 67% are below

their 50-DMA and 48% are below their 200-DMA.

We maintain a cautious outlook as indices face upside resistance at their respective 50-DMA. Leadership re-
mains narrow and we advise reducing exposure as ideas break below long-term support levels. We believe a

defensive posture should be taken until the technical profile across indices, sectors, and groups improves.

Edwards Lifesciences

Posted on by Raj Gupta

Key points:

The stock broke out of a cup-with-handle base on July 24 post print. It is constructively trading higher with support at its 21-DMA.
Fundamental ratings: EPS Rank 93, top Composite Rating 99, top SMR Rating A.
Technical ratings: RS line near all-time high, RS Rating 96, A/D Rating A

Market View

Posted on by Raj Gupta

U.S. Market

The U.S. market is in an Uptrend Under Pressure. The S&P 500 and Nasdaq continue to whipsaw below 50-
DMA resistance. Though the Nasdaq did stage a day-six follow-through on Tuesday, gains were immediately
wiped out Wednesday with instant distribution. Further, few quality ideas have been set up technically to buy with
the majority chopping around within consolidation. Our primary expectation is that the August 5 lows (S&P 500:
2,822; Nasdaq: 7,662) are undercut and we eventually test the 200-DMA. This would result in the market status
being moved back to a Downtrend. We would change our current cautious outlook should indices rally strongly,
close, and importantly hold above their respective 50-DMA. Should that occur, we would move the market status
back to a Confirmed Uptrend.