EB Daily Market Report - Monday, January 13, 2020
Executive Market Summary
- There are no key earnings or economic reports due out today, but big earnings will kick off tomorrow
- The 10 year treasury yield ($TNX) is at 2.85%, up a couple basis points
- 10 of 11 sectors are higher today, led by materials (XLB) and real estate (XLRE)
- Healthcare (XLV) is lagging and is the only sector losing ground
- The FAANG stocks are all higher today and helping to lift our major indices
- Our only active trade alert VC is up today and attempting to rally off gap support
Special Event
We are hosting a webinar this afternoon, "The January Effect and Top 15 Stocks for 2020". It will be an educational event where I'll share the strong correlation between U.S. stock market performance in January and subsequent performance during the balance of the year. It's quite remarkable and held perfectly true in 2019. Get a leg up on others by watching January 2020 performance to see what it's suggesting we might see during the balance of 2020.
Also, at Market Vision 2020, I unveiled my Top 15 Stocks for 2020. They were based solely on the fact that these companies have based for very long periods and have either (1) just broken out, or (2) are on the verge of breaking out. I'd like for all EarningsBeats.com members to have this information, so here are the ticker symbols of the 15 stocks (in alphabetical order):
BKNG, CERN, DIS, HOLX, KSU, LEG, PCAR, PPG, QRVO, RCL, SWKS, VRTX, XLNX, XRX, ZBH
I'll review these 15 charts during this afternoon's webinar as well. As always, we'll record the webinar for those who cannot attend the event live.
The room will open at 4:00pm EST and the event will begin promptly at 4:30pm EST. Here's the link for the event:
Market Outlook
Seasonality favors a further rise in equity prices. Historically, I've been following the S&P 500 since 1950, the NASDAQ since 1971, and the Russell 2000 since 1987, and it's important to note that January through April tends to carry with it very bullish implications and the past 10 years (duration of current bull market) would confirm this. Here's a seasonal chart of the S&P 500 for the past decade:
The January through April stretch has been this bull market's strongest consecutive four month period. Furthermore, since 1987, January has been the best month of the year for the NASDAQ. The NASDAQ has posted an annualized return of +30.40% since 1971 and has risen 31 times in the past 48 years. The only month that provides better odds of a push higher is November.
Sector/Industry Focus
Will biotechnology ($DJUSBT) be a major leader in 2020? I believe it could be, but I want to see the confirming breakout:
I can only say this.....keep an eye on this chart. Biotechs have come to life, but the recent is rally is nothing compared to what we could see later in 2020 if this pattern breaks to the upside. We added both Amgen (AMGN) and Vertex Pharmaceuticals (VRTX) to our portfolios on November 19th because of their strength, but also because of the potential of the entire industry group if resistance at 2200 is cleared. Friday's high was 2200.07.
Watch closely.
Active Trade Alerts
We have just one active alert right now:
VC (+0.42%) - reports earnings on February 19. VC hit our final entry price at 84 last week, so our average cost is now 86.05 with a closing stop at 83.50. Patience has paid off for our entry as all 5 entry prices triggered. Now we'll see whether the key support we identified holds. If it doesn't we'll exit with a small loss. If it does, then we'll continue to monitor the technical look of the trade in the days ahead. The first bullish technical development would be a confirmed close back above the 20 day EMA.
Strong Earnings ChartList (SECL)
What's working on the SECL? One way to answer that question is to see how many SECL stocks are setting new 52 week highs today. There are currently 281 stocks on our SECL and 39 are setting new highs today:
I further scaled down the list by only reviewing such stocks with SCTRs below 90, suggesting these stocks could be relatively new to setting fresh 52 week highs. Here is the list, from lowest SCTR to highest SCTR:
There's a mix of sectors and industry groups. After looking at each individual chart, I specifically wanted to highlight the following:
BRKR:
BRKR is uptrending nicely and has just broken out of a bullish ascending triangle continuation pattern. This pattern measures to 57.50 initially. The volume thus far looks to be solid and should confirm this pattern breakout.
FB:
FB breaking out on this chart is a big deal. Not only are we seeing it on this 1 year chart, but FB is also breaking above its July 2018 high as well. I selected FB as my favorite FAANG stock for 2020 as I believe this breakout is just beginning a major advance. It doesn't hurt that internet stocks ($DJUSNS) have broken out of a technical pattern that measures 20% higher.
EHC:
Health care providers ($DJUSHP) have been a leader during the three month S&P 500 melt up that we've experienced. EHC hadn't really participated, however, as it was consolidating gains made from late-August into November. Today's continuation gap suggests we'll see higher prices down the road. The top of gap support now becomes a solid entry point on any short-term weakness.
Movers & Shakers
Here are two SCTR movers today worth considering based on their technical outlooks:
CI:
CI has been an improving stock and just recently broke out above a double top. The pullback is testing both price support and the rising 20 day EMA. I'd expect a bounce off the 20 day.
SRPT:
The green arrows mark two different key levels, both resulting from gaps - one higher and one lower. Current price action is down and SRPT is now trading in this key gap support zone. A reversing candle or long tail to the downside could mark a significant bottom. SRPT comes with plenty of risk as those large gaps would attest.
Earnings Reports
Here are the key earnings reports for this week, featuring stocks with market caps of more than $10 billion. I also include a few select companies with market caps below $10 billion. Finally, any portfolio stocks (or active trade alerts) that will be reporting results are highlighted in BOLD. Please make sure you check for earnings dates for any companies you own or are considering owning:
Monday, January 13:
SJR
Tuesday, January 14:
JPM, WFC, C, DAL, INFO, WIT, FRC
Wednesday, January 15:
BAC, UNH, USB, GS, BLK, PNC, SCHW, KMI
Thursday, January 16:
TSM, MS, CSX, BK, PPG. Others less than $10 bil: OZK, PRGS
Friday, January 17:
HDB, SLB, STT, FAST, CFG, RF, KSU, JBHT
Economic Reports
None
Happy trading!
Tom