Should we expect a breakout above 4,700 or a fake out? The honest answer is to say that is “unknown and unknowable” because there are no crystal balls or time machines to give us 100% certainty, notes Steve Reitmeister, trading expert and editor of Reitmeister Total Return.
However, we have to appreciate that either is highly plausible. Also important to note that the primary long term trend is bullish. Let there be NO DOUBT about that with rates still at historic lows and the economy improving rapidly from the devastations of Covid.
So in general, we want to lean bullish. And anyone getting too cute in betting heavily that stocks will go lower at this time is likely to look quite foolish. However, I suspect that the fairly big 1 month move from 4,300 to 4,700 has taken some steam out of this bull for the near term.
That makes me suspect that more of a consolidation period around 4,700 is the most likely outcome. Maybe sometimes flirting about 1% above that mark. Or perhaps up to 2-3% below defines a likely consolidation range we could play in til the Santa Claus rally takes over with 4,800 pretty much a certainty before the year ends. 5,000 not out of the question.
The point is to stay bullish as any pullback would be short lived and shallow. But indeed these consolidation periods come hand in hand with serious sector rotation that could easily trim 5-10% off your favorite stocks. That leads to a buy the dip mentality when the best stocks go on sale.
Putting it altogether we are in the midst of a long term bull market that is potentially experiencing another brief pause (consolidation) before building up the strength for the next run higher. So continue to have a bullish bias with an eye to buying the dip on your favorite stocks.
Our latest recommendation is Evercore (EVR). Why am I buying? Clearly you have noticed how hot the IPO market is of late. For example, all the EV companies soaring above the GM's and Fords of the world (which is insanity).
Well this type of market is ripe pickings for investment banking firms. And Evercore is right in the heart of the industry seeing exploding earnings results...and thus thriving share price.
The POWR Ratings also sings EVR's praises as it is the #3 ranked stock in a top rated industry. And as we drill down into the specifics we see an A for Quality (which is the most important component grade) and B for Value.
The value story doesn't end there. On average analysts see 16% upside in shares to fair value of $177. However, that seems way too low given a PE of only 11.
Plus they are averaging 23% earnings beats the last 3 quarters. Meaning it is ridiculously cheap now versus a market with 20-25 multiples for most firms. PLUS the fact that they keep crushing earnings quarter after quarter which leads to higher and higher fair value.
A price of $200 a share seems a much more reasonable target given the current earnings picture. And $250+ is not out of the question next year if they keep rocking and rolling with earnings reports. That is why I love the idea of picking up shares at just a notch over $150.
