Stock Market Analysis: Expert Commentary and Strategic Picks - Nov 8

It’s a new market now.

As written last week, whatever the outcome and whoever the winner, the market would eventually come out stronger as bulls would take back the charge. This exactly happened as markets roared proving they like certainty in policies and future landscape and hate uncertainty. The Dow Jones Industrial average logged its biggest gain (+3.57%) in two years on Wednesday. Take a look at the weekly market performance:

Index Friday (11/08) Weekly YTD 1 Year

S&P 500: +0.38% +4.66% +25.70% +36.80%

Dow Jones Industrial: +0.59% +4.61% +16.71% +28.95%

Nasdaq 100: +0.07% +5.41% +25.50% +37.90%

Nasdaq Composite: +0.09% +5.74% +28.48% +41.29%

Russell 2000: +0.74% +8.74% +19.68% +41.93%

Add the fact that the period from November till January 18 has been markets’ best performing period dated back to 1950s and a Trump presidency might continue to support the on-going rally. Small stocks perhaps were the biggest winner last week as the Russel 2000 Index ETF (IWM) registered a +8.74% gain last week, breaking the all-time high after a long wait for two years. In fact, all other indices also hit their new all-time highs as S&P 500 surpassed the 6,000 level for the first time.

The performance of individual S&P 500 sectors was as follows:

Sector Weekly Performance

Discretionary, XLY: +7.51%

Energy, XLE: +6.50%

Industrial, XLI: +6.03%

Technology, XLK: +5.92%

Financials, XLF: +5.47%

Communications, XLC: +4.09%

Real Estate, XLRE: +2.74%

Healthcare, XLV: +1.65%

Materials, XLB: +1.44%

Utilities, XLU: +1.34%

Staples, XLP: +0.84%

Discretionary was propelled by the likes of Tesla (+29.01% up) which was buoyed by the Trump presidency and its favorable impact on Tesla owner Elon Musk's businesses. Another notable performer was Amazon which finally broke its 200 level (as mentioned in our last few commentaries). Technology, Energy, Industrial and Financials were other major achievers signaling that this is a broad market rally and has legs going forward.

Important Events next week:

Wednesday (11/13): Core CPI (MoM and YoY), CPI (Consumer Price Index)

Thursday (11/14): Initial Jobless Claims, Producers Price Index (PPI), Fed Chair Powel speaks.

Friday (11/08): Core Retail Sales, Retail Sales

Important Earnings this week:

Some important Q3 earnings results in the upcoming week:

Monday (11/11): CAVA Group (CAVA)

Tuesday (11/12): Shift4 Payments (FOUR), Home Depot (HD), On Holding (ONON), Shopify (SHOP), Cisco (CSCO)

Wednesday (11/13): Nu Holdings (Nu)

Thursday (11/14): JD.com (JD), Disney (DIS), Bilibili (BILI), Applied Materials

Friday (11/15): BABA

Stocks Selection Performance reviews (1 year):

We have been identifying different stocks for almost a year now. It is a good time to review some of the stocks picked during the last year and compare their performance with the broader market. Here are some noteworthy stocks picked during the last one year:

Symbol 5 Days Perf 1 Month Perf 3 Month Perf 6 Month Perf 1 Year Perf

APP 43.61% 102.08% 277.96% 291.91% 622.86%

CAVA 11.91% 11.52% 75.28% 98.49% 373.31%

HOOD 21.51% 19.25% 72.25% 71.09% 265.09%

NVDA 8.28% 11.09% 40.64% 63.29% 216.98%

PLTR 28.21% 40.87% 99.42% 170.83% 215.79%

AXON 29.40% 41.26% 63.70% 93.41% 162.73%

REVG 12.05% 9.66% 7.65% 19.70% 102.43%

TSM 4.10% 8.14% 22.27% 40.11% 118.70%

GE 7.09% -1.42% 11.59% 9.45% 103.54%

AVGO 8.02% 1.61% 26.01% 38.56% 101.55%

DRS 16.04% 19.38% 32.86% 66.39% 85.36%

MGNI 8.82% 11.37% 6.75% 52.92% 85.17%

META 3.76% -0.60% 15.64% 24.70% 84.30%

COST 7.04% 5.99% 12.43% 23.63% 66.34%

DECK 9.96% 8.44% 19.20% 23.45% 67.99%

EBAY 6.11% -7.86% 10.64% 24.55% 54.92%

AMZN 4.92% 13.93% 25.56% 10.73% 46.52%

TW 3.81% -1.15% 16.46% 18.54% 42.44%

SHOP 9.33% 5.50% 27.09% 38.88% 38.86%

GOOGL 3.96% 8.50% 10.07% 5.30% 35.28%

INSW -1.14% -18.89% -10.13% 27.64% -6.10%

WFRD 11.42% -3.73% -17.76% -28.64% -4.56%

RAMP 11.44% 17.96% 29.68% -12.24% -5.63%

TNK -2.62% -25.16% -17.78% -28.41% -12.64%

As is obvious from the list above, majority of our picks outperformed the broader market S&P 500 very handsomely, which returned 36.80% during the last one year. Only a few picks were not successful and those also with minimal losses. The objectives of our Stock Selection strategy are as follows:

1. Pick the leaders in the leading industry groups. Stocks that are leading their peers among the group.

2. Focus on those stocks with solid fundamentals such as continuously beating top and bottom-line analysis targets and quarterly earnings growth.

3. Buy only at actionable buy points when technical indicators are showing either a breakout from a base or a pullback to key moving averages while remaining in a solid uptrend.

4. Keep those which are performing well. Take some profits at 10-20% to take some risk off the table, and

5. Cut positions immediately if stop losses are triggered (maximum 8-10%). Do not allow stocks to give you a loss of 10% or more in majority of circumstances.

By aligning your investment strategy with the above guidelines, you can make sure that when you win, you win big and when you lose, the loss is small. Remember, it is not possible to develop a 100%-win strategy as losses are inevitable and will occur. Key is to keep those small compared to your gains over a large number of trades.

Long-Term Stocks:

Our long-term stocks are those in which we have the conviction that they have strong business fundamentals and enjoy moats in their respective industries, hence the chances of long-term profits are high.

MSFT:

Microsoft increased by 2.97% in the week and tried to rebound with the broader market and closed above its key moving averages. We continue to think that this could be an opportunity to load up the shares for the long term with a tight stop loss below 384.

NVDA:

Last week we mentioned that this was an opportunity to add to Nvidia positions as it increased by +9.03% post elections scoring a new all-time high.

We don’t see anything fundamentally wrong with Nvidia and any pullback to its key moving averages (like 20-days or 50-days EMA) will find support if the broader stock market rally is intact. Now being the most valuable company in the world, we remain optimistic about Nvidia’s long-term growth prospects.

AAPL:

Apple is under pressure after Berkshire Hathaway reported a 25% reduction in its stake in Apple and some unfavorable reports on its newly introduced iPhone 16 sales. Nevertheless, we keep our long-term stance on Apple as it offers an entry point for aggressive investors at current price or wait for a break beyond 233.09.

COST:

As expected, Costco ended its pullback and jumped to new all-time highs beyond 922.61. As we have said earlier, it is a slow-moving item, but a long-term leader based on its operating model and consistent performance. Still in actionable range.

Medium- and Short-Term Picks:

META:

As expected, Meta stabilized after the elections and seems to consolidate at current levels before trying to make another attempt towards its recent highs of 602.95 Aggressive investors could take a smaller position (50%) at current levels, otherwise wait for a breakout above 603. Seasonality factors also support as Meta has generally beaten S&P 500 during the months of Nov-March.

AMZN:

Finally, Amazon staged a breakout beyond the 200 level as predicted. Favorable holidays season could lead to further gains. Still in actionable range till 213.

PLTR:

PLTR was due for a breakout which it did on its favorable earnings results and future guidance. The stock leapt forward with a huge gain of 39.29%. If you have missed this breakout then wait for another pullback to moving averages. It seems to be another long-term AI leader in the making.

Interesting Stocks for Watchlist:

As stated earlier, we target companies which have strong fundamentals, continuous earnings growth and are expected to increase their earnings in future as well, so even if they drop with the broader market, chances of their rebound are stronger based on their relative strength to the rest of the market. Here are some stocks to consider:

RACE:

Ferrari manufacturer reports did not excite the investors, and the stock pulled back by 4.68% last week. Nevertheless, its uptrend is still intact, and we expect it to get support at current levels for a move back to 500. If an entry is made at the current levels, then the stop loss should be below the 50-Week EMA line at 417.

AVGO:

We pinpointed last week that Broadcom has pulled back to a good range for an entry targeting the 200 level. This is exactly what happened as the stock gained 8.71% last week and now eyeing 200 level for another attempt.

CMG:

CMG is consolidating and perhaps waiting for its next attempt forward. It is still actionable at current levels while with a tight stop loss around 52.65 levels.

VRT:

We mentioned last week that Vertiv was actionable with a potential to test 124. The stock gained a handsome +17.63% last week and closed at 125.75. Aggressive investors could still make an entry targeting another 10% but for conservative investors, it seems a bit extended, and another pullback is desired.

TSM:

Highlighted last week, TSM gained +4.28% and could move further to test its previous highs at 212.60 and beyond. In fact, if this trend persists then it could prove to be another winner in the Tech sector.

Loar:

For aggressive investors who want to put some stake on new issues, Loar Holdings is a manufacturer of more than 15,000 niche aerospace and defense components used in aircraft and defense systems. Since its debut in April this year, stock has tripled its value and is likely to keep the uptrend. Its earnings are due on Tuesday (11/13) so stock could be very volatile, however, there are chances for a breakout beyond 92.17.

CAVA:

This mediterranean casual restaurant chain operator has been mentioned three months ago here and since then it has returned 75% while 1 year return is 373%. Although, seems extended at current prices but watch out its behavior after earnings on 11/12 (Monday). A decent pullback to 127-130 could provide an entry into this growth story stock.

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Happy Trading and best regards,

Disclaimer:

The information provided here is for educational / learning purposes only and should not be taken as purchase or sell recommendations. Trading / Investing in Stocks and derivatives is highly risky and could result in a substantial or complete loss of invested capital.

Employees and Owners of MJ Software LLC are not registered Financial Advisors with FINRA or SEC and for any financial advice please consult a registered financial advisor.