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

The U.S. market is in a Confirmed Uptrend. The Nasdaq staged a day 5 follow-through day Wednesday, and has since consolidated

gains constructively. The S&P 500 also rallied strongly, and similarly has consolidated those gains constructively for the last two ses-
sions. Both indices are now facing resistance at their respective 50 and 200-DMA.

Technical action among growth ideas has been strong. Multiple risk-on ideas are now forming the right side of their respective ba-
ses, however, many are now also facing price and/or moving average resistance. Forty-three Nasdaq 100 stocks are trading below

their 50-DMA, despite rallying a median of 4% over the last five sessions.
To gain conviction in this new follow-through day, we will need to see both the major averages and ideas regain moving average
resistance over the next several sessions, which should lead to a broadening of leadership. Conversely, if we see the major averages
and ideas begin to fade at these levels, the follow-through day is at risk of failing.
Our recommendation is to gradually increase risk, buying only high-quality growth ideas that are breaking out of earlier-stage bases.

As the market progresses through resistance, additional ideas will emerge for new buying opportunities. We anticipate our U.S. Fo-
cus list count to increase when and if the market progresses higher.

Key Points from the latest Strategy View
• There are three main categories that encompass 27 prior instances when the S&P 500 has fallen to 9% or more from highs
and closed below its 200-DMA since 1970.
• Forward gains post-follow-through-day in bulls are substantially better. If the market struggles for the forward
four/eight/thirteen weeks post-follow-through-day, this has typically been a bad sign.
• One follow-through-day failure is fine, in fact, outcomes are even better. But, when two follow-through-day failures have
occurred (undercut of lows before new highs), each time this has led to a bear market.
o Bears have an average of six failed follow-through days before lows.

Stocks on our U.S. Focus List: Current Sentiment
Our USFL of 38 ideas gained 4.7% on average this week, underperforming the S&P 500 (+4.8%) and the Nasdaq (+5.6%).

Actionable Focus List ideas: Aon ( AON ), Astrazeneca ( AZN ), Canada Goose ( GOOS ), Chefs’ Warehouse ( CHEF ), Ciena ( CIEN ), Dr Red-
dys Labs ( RDY ), Edwards Lifesciences ( EW ), Fabrinet ( FN ), Horizon Pharma ( HZNP ), Johnson & Johnson ( JNJ ), Livent ( LTHM ), Mi-
crosoft ( MSFT ), Nextera Energy ( NEE ), Planet Fitness ( PLNT ), PRA Health Sciences ( PRAH ), Procter & Gamble ( PG ), Rogers Communi-
cations ( RCI ), Starbucks ( SBUX ), Unitedhealth ( UNH ), Veeva Systems ( VEEV ), Zoetis ( ZTS ).

Market View

Posted on by Raj Gupta

The U.S. market is in a Downtrend. The Nasdaq undercut the October 29 low this week, invalidating the November 7 follow-through day ( FTD ). We
are now looking for a new low to be established for a minimum of three sessions before looking for a new FTD. Support on the Nasdaq is the April
low of ~6,800, while support on the S&P 500 is the October low of ~2,600. Both indices are currently trending downward, with resistance along
their 50- and 200-DMA.
There remains a lack of leadership in the market, with the majority of growth ideas still trading below their respective 200-DMA and few showing
signs of technical improvement. This backdrop warrants a cautious approach and is not indicative of a risk-on atmosphere.
Our recommendation is to raise cash if possible, or, if you must commit capital, buy only defensive ideas that have been consistently trading above
their respective 50-DMA. If we get another FTD in the next few weeks, our recommendation will be to only increase risk gradually. We need to see
the market prove itself by regaining prior support levels, allowing leadership to broaden outside of defensive sectors.
Stocks on our U.S. Focus List: Current Sentiment
Our USFL of 36 ideas lost 4.7% on average this week, underperforming the S&P 500 ( -3.8% ) and the Nasdaq ( -4.3% ).
Actionable Focus List ideas: Aon ( AON ), Astrazeneca ( AZN ), Canada Goose ( GOOS ), Chefs’ Warehouse ( CHEF ), Fabrinet ( FN ), Horizon Pharma
(

), Johnson & Johnson (

), Nextera Energy (

), Planet Fitness ( PLNT ), Procter & Gamble ( PG ), Ulta Beauty ( ULTA ), Wright Medical ( WMGI )
USFL ideas weekly earnings line-up:
Wednesday: Close: VEEV
By Sector
Consumer Staple ideas on the U.S. Focus List led for a second straight week. NOMD, CVGW, and CHEF are all trading around their respective 50-
DMA, while LW, PG, and MKC are all trading less than 5% off highs and around their respective 21-DMA. Other sectors traded down, led lower by
Technology and Retail. There are now only six USFL Technology ideas remaining after multiple removals over the last several weeks. MSFT, INTU,
and VEEV are trading at their respective 200-DMA, while the remaining ideas, FN, XLNX, and CIEN remain intact trading above their respective 50-
DMA. Three of the remaining four USFL Retail ideas are under pressure. LULU is now trading more than 20% off highs and just above its 200-DMA,
while WING and OLLI are trading at their 100-DMA. ULTA remains strong, still holding up near highs with a relative strength line at new highs.
New Ideas or Deletions
We added Johnson & Johnson (

) and Nextera Energy (

), and removed Square ( SQ ), Alphabet ( GOOGL ), Servicenow
NOW ), Salesforce.Com ( CRM ), Adobe ( ADBE ), Paycom Software ( PAYC ), Quantenna ( QTNA ), Healthequity ( HQY ), Twilio
( TWLO ), and Five Below ( FIVE ) from the U.S. Focus List this week.

Market View

Posted on by Raj Gupta

The U.S. market is in an Uptrend Under Pressure. The S&P 500 and Nasdaq continue to whipsaw above the October 29
low, but below resistance along the 200-DMA. Distribution stands at two days on the S&P 500 and one on the Nasdaq. No

clear trend has yet to develop with the majority of growth ideas still consolidating. Breadth remains poor with defensive sec-
tors continuing to lead and nearly 300 S&P 500 stocks still trading below their respective 200-DMA. Given this backdrop, a

cautious approach is warranted. Focus only on high relative strength ideas consistently trading above their respective 50-

DMA, while reducing risk in ideas with RS lines at or near new lows. To gain conviction, we will need to see the major aver-
ages tighten up, regain moving average support, and leadership to broaden outside of defensive sectors.

Stocks on our U.S. Focus List: Current Sentiment
Our USFL of 44 ideas lost 2.3% on average this week, underperforming the S&P 500 (-1.6%) and the Nasdaq (-2.2%).
Actionable Focus List ideas: Aon ( AON ), Canada Goose ( GOOS ), Chefs’ Warehouse ( CHEF ), Ciena ( CIEN ), Edwards
Lifesciences ( EW ), Fabrinet ( FN ), Fidelity Natl Info Svcs ( FIS ), Horizon Pharma ( HZNP ), Planet Fitness ( PLNT ), Procter &

Gamble ( PG ), RBC Bearings ( ROLL ), Twilio ( TWLO ), Ulta Beauty ( ULTA ), Unitedhealth ( UNH ), Wright Medical ( WMGI ), Zoe-
tis ( ZTS )

USFL ideas weekly earnings line-up:
Monday: Close: INTU
By Sector
Consumer Staple ideas on the U.S. Focus List led this week. CHEF continues to trend higher off its 50-DMAand PG is now
testing a new all-time high. MKC and LW, despite being extended from their prior pivots, remain at all-time highs. No other

trends developed this week outside of Consumer Staple. Technology, Health Care, and Retail ideas traded in mixed fash-
ion. Within Retail, ULTA is hitting new highs, while XLNX, FN, and CIEN continue to trade at or near new highs with Tech-
nology. Within Health Care, EW, ZTS, HZNP, WMGI, and UNH held their respective 50-DMA, while VRTX and PRAH both

broke below that same level of support.
New Ideas or Deletions
We removed Idexx Labs ( IDXX ), Centennial Res ( CDEV ), Worldpay ( WP ), Global Payments ( GPN ), and S S & C Tech ( SSNC )
from the U.S. Focus List this week.

Grupo NotreDame Intermedica

Posted on by Raj Gupta

Key Points:

The stock broke into new highs on 1.7x average daily volume. This is a short base at just six weeks, however, technical ratings and rankings have sharply improved over the last several sessions. We recommend buying the idea with support along the 50-DMA.

Technical ratings: RS line is back at new highs, RS Rating 86, A/D Rating A.

Fundamental ratings: EPS Rank is 55 but will likely improve given consensus calls for EPS growth of 53% in 2018 and 37% in 2019. SMR Rating B, Composite Rating 95.

Market View

Posted on by Raj Gupta

The U.S. market is in a Confirmed Uptrend. The S&P 500 and Nasdaq staged a Day 7 follow-through day ( FTD ) on
Wednesday, rising more than 2% on above average volume. The FTD, however, is beginning to show signs of
failing following poor technical action on Friday. The Nasdaq closed back below its 200-DMA, while the S&P
500 retraced the FTD move and is now testing support at its 200-DMA. It is not uncommon to see near-term
profit taking shortly after a FTD given the size and quickness of the move off the bottom, however, in order to
stay constructive, we will need to see support come back into both the major averages and leading ideas alike
over the next few sessions. Further downside in both the S&P 500 and Nasdaq, coupled with failed breakouts in
leading ideas, will result in a failed FTD. Our recommendation remains the same. Take a gradual and selective
approach to increasing risk, buying only high-quality ideas that have held up well, as we remain in an overall
trendless and choppy market environment.
Stocks on our U.S. Focus List: Current Sentiment

Our USFL of 49 ideas gained 1.1% on average this week, underperforming the S&P 500 ( +2.1% ) but outper-
forming the Nasdaq ( +0.7% ).

Actionable Focus List ideas: Aon ( AON ), Chefs’ Warehouse ( CHEF ), Ciena ( CIEN ), Edwards Lifesciences ( EW ), Fab-
rinet ( FN ), Healthequity ( HQY ), Horizon Pharma ( HZNP ), Illumina ( ILMN ), Microsoft ( MSFT ), Nomad Foods

( NOMD ), Paypal ( PYPL ), Planet Fitness ( PLNT ), PRA Health Sciences ( PRAH ), Procter & Gamble ( PG ), RBC Bear-
ings ( ROLL ), Twilio ( TWLO ), Ulta Beauty ( ULTA ), Unitedhealth ( UNH ), Vertex ( VRTX ), Visa ( V ), Wright Medical

( WMGI ), Zoetis ( ZTS )
By Sector
Health Care ideas led this week. New additions HZNP and WMGI broke out from early stage bases,
while UNH and ZTS broke into new highs on the follow-through day. PRAH and EW regained their respective
50-DMA, while ILMN and VRTX are now building the right side of new bases. Consumer Staple ideas remain
resilient continuing to make new highs each session. LW, MKC, and PG continue to trend into higher highs,
while NOMD and CHEF both regained their respective 50-DMA following earnings results. Lower beta Financial
names also continue to hold up well. AON is making new highs, while MA, PYPL, FIS, and V are all forming the
right side of new bases. The action within Technology has been mixed. New ideas TWLO and FN broke into new
highs post earnings, while PAYC, GOOGL, NOW, CRM, and SSNC continue to consolidate in choppy fashion.
New Ideas or Deletions
We added Aon ( AON ), Horizon Pharma ( HZNP ), Microsoft ( MSFT ), Twilio ( TWLO ), Paypal
( PYPL), Fabrinet ( FN ), Ulta Beauty ( ULTA ), Wright Medical ( WMGI ), and Ciena ( CIEN ), and removed Match
( MTCH ) from the U.S. Focus List this week.

Market View

Posted on by Raj Gupta

The U.S. market is in a Rally Attempt. The S&P 500 and Nasdaq have now held above the October 29 intraday

low (S&P 500: 2,603; Nasdaq: 6,922) for four sessions. We are now looking for a follow-through day ( FTD ) be-
fore shifting the market into a Confirmed Uptrend. Currently, both indices are hitting resistance just under their

respective 200-DMA. Should the indices clear above that level next week, the next level of resistance will be the
50-DMA, which is ~5% above current levels. Overall, we still believe it is too early to increase risk in the market,
given that the majority of ideas are still repairing themselves technically. Just 12 (~29%) of 41 U.S. Focus List
ideas are trading above their respective 50-DMA, while only 114 stocks within the S&P 500 are trading above
that level. If we get a FTD, our recommendation will be to gradually increase risk, committing capital to only

high relative strength ideas that have recovered the quickest and have reached risk optimal entry points. We be-
lieve the market will provide additional opportunities to buy growth ideas as it progresses higher and through

the multiple levels of resistance that still remain. Remain patient for now, but be ready to buy a few actionable
U.S. Focus List ideas when and if we get that FTD.

Stocks on our U.S. Focus List: Current Sentiment
Our USFL of 41 ideas gained 3.9% on average this week, outperforming the S&P 500 ( +2.4% ) and the Nasdaq
( +2.6% ).
Actionable Focus List Ideas: Chefs’ Warehouse ( CHEF ), Healthequity ( HQY ), Procter & Gamble ( PG ), Quantenna
Communications ( QTNA ), Xilinx ( XLNX ), Zoetis ( ZTS )
USFL ideas weekly earnings line-up:
Monday: Close: CDEV
Tuesday: Close: MTCH, PLNT
Wednesday: Close: SQ
Thursday: Open: WP
By Sector
Technology recovered this week, with multiple ideas rebounding from oversold levels. Despite the rally, most
ideas are still consolidating and have yet to reach ideal pivot points. XLNX is the strongest, breaking out into new
highs, while QTNA regained its 50-DMA and is actionable as an early aggressive entry. VEEV and INTU found
support at their respective 200-DMA and are still basing overall. Capital Equipment ideas also recovered, with
ROLL breaking into new highs post earnings and HQY now constructively forming the right side of a new base.

Global Health Care Sector— Medical Devices and Equipment

Posted on by Raj Gupta

Some highlights from the report:

U.S.

Given our recent downgrade of the U.S. market to a Downtrend, we now recommend an equal-weight position from overweight within Medical Technology. The iShares U.S. Medical Devices ETF ( IHI ) has broken both its 50- and 100-DMA on heavy volume. We believe the next level of support is the 200-DMA, which is ~5% lower.

Multiple ideas across the U.S. Focus List have broken near-term levels of support warranting a cautious approach until technical profiles improve.

Fundamental profiles remain intact and valuation and growth remain in line with historical medians. The current 66 profitable companies above $500M in market cap within the Medical Product and Equipment industry groups have a five-year EPS median growth rate of 13% and a five-year median (high-to-low) P/E ratio range between 16 and 45. Over the next year, consensus calls for similar growth and valuation. Next fiscal year’s EPS is expected to grow by a median of 13% with a P/E ratio of 25x.

U.S. Focus List ideas: ABMD, ALGN, IDXX, ILMN, EW, PRAH; Stocks of Interest: WMGI, HAE

 EMEA

Health Care remains a long-term leading sector, but has come under severe selling pressure over the last two weeks due to general market weakness. We recommend a selective approach across the region with few growth ideas currently showing technical strength.

European Focus List idea:STMN.CH; Stock of Interest: ELKB.SE

 APAC

Health Care is outperforming over the last 26 weeks, but is now weakening over the last month. There are multiple stocks of interest in this region, as many ideas have strong fundamental profiles, despite weak technical profiles. We recommend a patient approach until market conditions improve before buying medical technology ideas within the region.

APAC Focus List ideas: AS@H.JP, COH.AU, NAN.AU; Stocks of Interest:WXBO.HK, MPS.HK, TERU.JP