5 Stocks for a Bullish Year End

08/23/2013 7:00 am EST

Focus: STOCKS

Joseph Fahmy

Managing Director, Zor Capital, LLC

Even though the market has fallen six trading days in a row, Joe Fahmy of JoeFahmy.com is still bullish and offers five picks that could end higher by year end.

The market is in a vulnerable position right now. Everyone seems to be worried that the Fed will taper their bond purchases, interest rates will rise, and the stock market will go into a deeper correction. My feeling is that the next few weeks will be a little shaky, mainly due to this uncertainly and the historically poor seasonal time for the market. However, I still maintain that the fourth quarter will be strong and we will see new highs before the end of the year.

Here is my reasoning:

1) Bernanke will NOT taper. He has not come this far to let things collapse, especially because the economy is still a bit vulnerable.

2) The market will NOT let fund managers off the hook. Many managers are underinvested and underperforming for the year, and the market giving back all its gains would be “an easy way out” for too many professionals.

3) There are still many amazing growth stocks that are holding up well. To me, this is a sign that there is still some appetite for risk out there. If this scenario plays out, here are five stocks that I feel will be higher by year end:

1) Netflix (NFLX) – Strong technical chart, highly shorted. Strong earnings and sales growth. If they were private, I bet they would have a $25-30 billion valuation (it is currently $15 billion). Some big institutions are behind this name. Strong technical support at $240. A break below that level would be a suggested stop for a swing trader.

2) Chipotle Mexican Grill (CMG) – Strong weekly chart, also highly shorted. One of the premier growth names in the restaurant sector. Support at $390. I wouldn’t be surprised to see $500+ within the next year.

3) Herbalife (HLF) – Yes, Herbalife. I know it’s a controversial stock. If you’re too afraid to touch it, THEN DON’T. As I always say, only trade what you are comfortable with. There’s too much to explain here, but I think this stock will see $90+ within a year. Again, only trade what works for you!

4) EOG Resources (EOG) – Strong fundamentals. three quarters of accelerating earnings and sales growth. Strong institutional support. Great technical chart. A great way to play the surge in US production of oil from shale formations and the overall fracking boom.

5) Splunk (SPLK) – I suggest reading up on the term “big data.” Splunk is a great software play on this emerging growth area. They have strong institutional support and strong sales growth. If you’re scared because they don’t have earnings, like many new technologies, earnings usually catch up later. Again, if you’re not comfortable, leave it alone.

ONE FINAL NOTE: I don’t know anyone’s time frame, risk tolerance, or investment objectives. These are simply ideas that I feel can go higher over the next six-12 months if the market cooperates. In other words, don’t ask me to hold your hand through a trade. Have a plan, and have some confidence and conviction in what you are doing. As always, if a trade moves against you, have a stop in place to protect your portfolio.

By Joe Fahmy, Trader and Blogger, JoeFahmy.com

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