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 S&P 500 and Nasdaq are consolidating the last two weeks of gains, holding above their respective 50-DMA. Meanwhile, the Russell 2000 broke out into new all-time highs. Distribution did rise this week, but we will begin to see expiration next Thursday. Leadership continues to act well, with multiple ideas across the U.S. Focus List trading at new highs. We maintain our positive stance on the general market.
Stocks on our U.S. Focus List: Current Sentiment
Our USFL of 71 ideas (one addition) lost 0.2% on average this week, outperforming the S&P 500 (-0.5%) and the Nasdaq (-0.7%).

By Sector
Retail ideas on the U.S. Focus List led this week. OLLI jumped more than 5% on the week back into all-time highs and is now extended from an ideal pivot. LULU reached a new century mark and also remains extended. HOME continues to trend higher off its 21-DMA, while FIVE bounced off its 50-DMA, turning actionable. Health Care ideas also performed well with ABMD, ALGN, and ILMN all reaching new highs. UNH also found support at its 50-DMA and remains actionable. Technology ideas pulled back this week. Software ideas RHT and NOW pulled back to their respective 50-DMA, while PAYC pulled back to its 100-DMA. Internet-Content names GOOGL and WUBA also pulled back to their respective 50-DMA. Conversely, MPWR, PSTG, and SPLK remain at or near new highs.

New Ideas or Deletions
We added Weight Watchers Intl  to the U.S. Focus List this week.

Market View

Posted on by Raj Gupta

The U.S. market is in a Confirmed Uptrend. The S&P 500 and Nasdaq are both trading above their respective 50-DMA, while the Russell 2000 is trading at all-time highs. Leadership is broadening with 10 of 11 sectors now trading above their respective 50-DMA and multiple ideas reaching new highs this week. Going forward, we will be looking for the major averages to hold support along the 50-DMA and avoid distribution. We are also look-ing for the U.S. Focus List count to increase and for breakouts to progress further into new highs. With market conditions improving, we recommend putting additional capital to work with a focus on high relative strength ideas from leading and/or improving industry groups.

sStocks on our U.S. Focus List: Current Sentiment

Our USFL of 70 ideas (one net removal) gained 3.5% on average this week, outperforming the S&P 500 (2.4%) and the Nasdaq (2.7%).

By Sector

Technology and Health Care ideas on the U.S. Focus List led this week. Within Health Care, multiple ideas broke out including SUPN which became quickly extended after Friday’s move. ABMD also continues to hit new highs each day and remains extended. ALGN reached a new pivot Friday, turning actionable, while ILMN and IDXX remain at pivot points. Within Technology, software ideas are the clear leaders. TEAM, SPLK, VEEV, ADBE, NOW, CRM, and RHT among others are all trading at new highs after coming under heavy accumulation this past week. Retail ideas, which had been leading with Energy prior to this week, are now consolidating gains. WING, FIVE, and LULU pulled back off highs, while HOME and OLLI continue to trend higher.

Market View

Posted on by Raj Gupta

The U.S. market is in an Uptrend Under Pressure. After yesterday’s big upside reversal off support, indices re-main under accumulation. Regaining and holding above resistance at the 50-DMA will increase our confidence in the market. For now, we continue to advise a selective approach to buying, with a focus on high relative strength stocks, as both the Nasdaq and S&P 500 have an A/D Rating of E.

Stocks on our U.S. Focus List: Current Sentiment

Our USFL of 71 ideas (one net removal) gained 1.3% on average this week, underperforming the S&P 500 (-0.2) and in line the Nasdaq (1.34%).

By Sector
Small cap Technology ideas on the U.S. Focus List outperformed due to strong earnings results from QTWO and RP. Both ideas are extended. MB is breaking out from a cup consolidation ahead of earnings next week. Pockets of Health Care remain strong as IDXX and ABMD broke out into all-time highs on bullish earnings results. IDXX is actionable from a cup-with-handle consolidation. In Retail, WING was an outlier, after gapping up ~10%. WING remains extended. Conversely, a few names, including KLXI, PAGS, and PVH, were hit with heavy distri-bution and pulled back into their respective bases.

Market View

Posted on by Raj Gupta

The U.S. market is in an Uptrend Under Pressure. The S&P 500 and Nasdaq are now finding resistance at their respective 50-DMA. We will be looking for both to regain this level and for volume trends to improve in order to become more confident in the market. Leadership is also thin outside of Energy. Only a handful of ideas have been able to break out and move into higher highs, while most continue to consolidate. Therefore, we continue to recommend a cautious and patient approach until market conditions improve.

Stocks on our U.S. Focus List: Current Sentiment

Our USFL of 72 ideas (two removals) lost 0.6% on average this week, underperforming the S&P 500 (flat) and the Nasdaq (-0.4%).

By Sector

Energy remains the leading sector. CLR and WRD continue to hit new highs and remain extended from an ideal pivot. FANG and NEP are actionable after regaining their respective 50-DMA. Retail ideas continue to act well with AMZN gapping up Friday and HD turning actionable after regaining its 50-DMA. WING, HOME, LULU, FND, and OLLI are also all still trading at or near new highs. Financial ideas are also acting well. SIVB gapped up into new highs post earnings and is now extended. ZION, TCBI, SCHW, and WAL are all back above their respective 50-DMA. Conversely, Technology remains under pressure. AMAT was removed from the USFL after

Market View

Posted on by Raj Gupta

Market Overview

The The U.S. market remains in a Confirmed Uptrend. The S&P 500 and Nasdaq continue to trade in choppy fashion, closing back below their respective 50-DMA on Friday. We will be looking for each to regain that level early next week as a further break lower will likely result in a move back to the 200-DMA. This is a bifurcated market. Multiple ideas are still hitting new highs or consolidating constructively, while multiple other ideas, most-ly from lagging industry groups, are also gapping down to new lows post earnings. We continue to recommend a selective and patient approach, buying only leading ideas from leading and/or improving industry groups as they break out of sound price bases on heavy volume.

Stocks on our U.S. Focus List: Current Sentiment

Our USFL of 74 ideas (one net addition) gained 1.7% on average this week, outperforming the S&P 500 (+0.5%) and the Nasdaq (+0.6%).

By Sector

Energy remains the clear leading sector. CLR and WRD are now extended from a proper pivot, however FANG remains actionable after regaining its 50-DMA this week. Retail ideas continue to act well with AMZN regaining the 50-DMA, and WING, HOME, LULU, FND, OLLI, and FIVE all still trading at or near new highs. Financial closed the week strong, despite mostly sideways action. SCHW, TCBI, SIVB, FLT, SQ, and PYPL are all now back above the 50-DMA. Conversely, Technology closed back below its 50-DMA this week, following a big selloff in semiconductors. Multiple ideas including MRVL, MKSI, AMAT, and CY are all now back below their 50-DMA.

Market View

Posted on by Raj Gupta

Market Overview

The U.S. market is in a Confirmed Uptrend. On Tuesday, the S&P 500 and Nasdaq staged a Day 6 follow-through, giving the go-ahead to gradually buy high-quality stocks with strong sales and earnings as they break out of sound price bases. Going forward, we will be looking for the major averages to regain their respective 50-DMA and for upside volume to pick up as indices clear resistance. We will also be looking for leadership to broaden as the majority of leading ideas are currently consolidating ahead of earnings, with few yet to break out. Our confidence in the follow-through day will increase if we begin to see these factors play out over the next few weeks. Conversely, signs that this follow-through day will fail include a clustering of distribution coupled with failed breakouts in leading ideas.

Stocks on our U.S. Focus List: Current Sentiment

Our USFL of 73 ideas (including four additions) gained 2.9% on average this week, outperforming the S&P 500 (+2%) and the Nasdaq (+2.8%).

By Sector

Energy led all sectors by a wide margin this week. Recent USFL additions, CLR and WRD, are leading the Oil&Gas-U.S. Expl&Prod industry group, and both remain actionable at new highs. Technology ideas also led this week, with the majority of software names bouncing off their respective 50-DMA. These names include TEAM, SPLK, RHT, RNG, TYL, QTWO, ADBE, and PAYC. Semiconductors are still recovering with a few regaining their respective 50-DMA this week, including MPWR, AMAT, CY, ON, and MKSI. Conversely, Financial ideas have lagged this recent move higher. Banks, including MS, TCBI, WAL, and SIVB, as well as payment processors, WP, PYPL, SQ, and FLT, all continue to consolidate around their respective 50-DMA.

Global Health Care Sector: Biotech/Pharma

Posted on by Raj Gupta

Key Points:

U.S.

*   The iShares Nasdaq Biotech ETF ( IBB ) continues to chop around with no clear trend over the last three months. We are now looking for the ETF to hold long-term support between $100-103. Though the fundamental backdrop is positive, uncertainty regarding healthcare policy and drug pricing continues to be an overhang on the entire industry. Further, multiple companies, including CELG and ABBV, have run into pipeline mishaps to start the year, resulting in severe technical breakdowns in individual charts.
*   Our recommendation is to focus on profitable biotechs driven by underpenetrated and superior FDA approved drugs with limited to no competition. VRTX, our sole U.S. Focus List idea, along with stocks of interest, LGND and SUPN, fit this profile. Additionally, all three are currently constructively forming new bases during this market correction, rather than breaking down below longer-term support levels.

EMEA

*   The European pharmaceutical market faces a number of challenges, including Brexit which has forced companies to obtain separate marketing authorization for their products. Further, innovators are increasingly being challenged by tougher pricing negotiations by payers, who are challenged by relatively weak economic growth and high drug prices. The European pharmaceutical market is expected to grow at a CAGR 3.5% from 2015–2022.
*   Similar to the U.S., we recommend a selective approach, focusing on the few ideas that are outperforming on a relative basis due to superior EMA approved drugs marketed in underpenetrated regions of Europe. IPN.FR, our sole European Focus List idea, along with stock of interest, SOBI.SE, fit this profile.

APAC

*   Chinese drug stocks remain under accumulation despite poor market conditions. The recent expansion of insurance coverage through the inclusion of drugs on China’s National Reimbursement Drug List (NRDL) and regulatory changes to speed up drug approvals are driving growth. In a policy meeting yesterday, the Chinese cabinet announced that it will offer preferential tax rates to generic drugmakers, setting the corporate income tax for qualified firms at 15% from 25%. The State Council also said it would draw up new incentives aimed at encouraging the development and production of generic drugs. China’s pharmaceutical market is projected to grow to ~$167B by 2020 from $117B in 2016, according to the U.S. Department of Commerce.
*   We have four drug names on our Focus List.  SFPG.HK and LVZN.HK are actionable. CPHA.HK and SBIL.HK are extended.