Cintolo's Trio of Trades

05/08/2017 2:45 am EST

Focus: STOCKS

Michael Cintolo

Vice President of Investments and Chief Analyst, Cabot Heritage Corporation

We remain mostly bullish on the market because the evidence remains mostly bullish, notes growth stock expert Mike Cintolo, editor of Cabot Top Ten Trader.

All major indexes are above their 50-day lines, the Nasdaq has shot ahead to new highs and strong stocks are generally reacting well to earnings and following through on the upside.

That said, there are a couple of things we’d like to see before we get fully bullish. First and foremost, we need to see the indexes hit new highs. Except for the Nasdaq, the other major indexes we track (S&P 500, NYSE Composite, S&P 400 MidCap and S&P 600 SmallCap) are all still stuck in their two-month trading ranges.

And three of those four indexes are basically sitting on their 50-day lines. That’s not bearish, but bull markets hit new highs, so we’d like to see these indexes do that in the days or weeks ahead.

Second, we’ve recently seen a good-sized expansion in the number of stocks hitting new lows. If the new lows remain elevated, it would raise the risk of a more severe market retreat going forward.

Meanwhile, here is a trio of new buy ideas:

Restoration Hardware (RH 57) has been acting extremely well in recent weeks, with a big rally in March and early April.

After a quiet period of calmness as the stock consolidated into its 25-day line, there has been a huge surge of buying as the company announced a mammoth share buyback program. Keep a lookout for a dip of a couple of points to buy a few shares.

Square (SQ) reacted well to earnings, continuing its uptrend in recent months and registering new price and relative performance peaks in the process.

There should be good support in the 17 to 18 area, so you can buy some around here with a stop in the mid-17s if you don’t own any.

XPO Logistics (XPO) built a base-on-base pattern during the past five months, but now appears to be getting going—the stock reacted well to earnings yesterday and is following through on the upside today (and is on track for new closing highs). You could buy some here with a stop near 48.5.

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