Current Focus List
The VoSI Focus List is a compilation and reference list of stocks for which Pocket Pivot or Buyable Gap-Up Reports have been issued. It is not intended as a "buy list" or a list of immediately actionable recommendations. Stocks on the list may or may not be in proper buy positions, and investors should exercise discretion and proper judgement in determining when and where stocks on the Focus List can be purchased. The following notes are intended to assist in this process. Please note that members can enlarge the Focus List image by clicking on the body of the email and then holding the Control Key while pressing the "+" key until it is large enough to read.
Big-stock NASDAQ names AMZN, GOOGL, MSFT, and INTC led the NASDAQ Composite Index on a sharp move to new all-time highs on Friday as volume ballooned. Friday's NASDAQ move was its largest one-day percentage gain since November of 2016. Prior to Friday's move, the NASDAQ's price/volume action appeared to be deteriorating, but in this QE market a single day's action can suddenly right the situation, catching investors by surprise.
The Dow Jones Industrials Index ran in place on Friday as big-stock NASDAQ names stole the show. However, it is tightly consolidating its prior parabolic move to the upside in a constructive manner. As we pointed out last week, a parabolic move does not necessarily indicate that a sharp pullback must ensue. The alternative is to see the index consolidate the prior gains in bullish fashion, which is precisely what the Dow is doing as it takes a short-term back seat to the NASDAQ's powerful move on Friday.
The paradox of having only six names on the current Focus List as the NASDAQ rockets to new highs attests to the peculiar character of this market. However, as we continue to move through the heart of earnings season, we think investors should be aware of stocks that are about to report earnings, and then to carefully watch the action following a specific stock's earnings report in case an actionable long set-up presents itself. Our primary issue with adding a large number of new names to the list at this time has more to do with the lack of fresher set-ups where strong fundamentals are starting to emerge, leading to the potential for a strong, sustainable intermediate-term uptrend. We strive to add the names most likely to outperform while keeping the list highly selective. Quality over quantity is key. That said, when the number of names measurably increases, it is indicative of strong market internals. 2017 has been a year where such an environment has been fleeting at best.
On Friday, the NASDAQ's strong move was led by a 13% gap-up move in AMZN is a great example of a stock that looked to be in trouble as of Thursday, but on Friday gapped up after earnings on a sharp 13% move, good for 128.52 points, the largest one-day point move in the stock's history. Volume was massive as money poured into the stock. Technically, this was a buyable gap-up using the 1050.55 intraday low as a selling guide, and the stock closed within 5% of that price level, keeping the stock within the farther reaches of the actionable BGU buy zone. We think the stock may have 10-15% upside potential from here, but it is not the type of situation we are looking for as a Focus List candidate. Nevertheless, it is an actionable set-up that one should be able to find on their own, given the obvious, high-profile status that AMZN enjoys, if they are familiar with the rules for buying BGUs.
The Market Direction Model (MDM) remains on the same buy signal it has been on since September 8.
Removed from the List this Week: Vertex Pharmaceuticals (VRTX).
Focus List Stocks Expected to Report Earnings this Week: FireEye (FEYE) on Wednesday after the close. Arista Networks (ANET) and Alibaba (BABA) on Thursday after the close.
Netflix (NFLX) held support at its 20-dema and the top of the prior cup-with-handle base and is now trading back above its 10-dma. On Friday it flashed a five-day pocket pivot, but we like to see a cluster of five-day pocket pivots in lieu of a single ten-day pocket pivot. However, the stock was already actionable when it was testing the 20-dema per our prior comments in our morning Focus List Notes.
Take-Two Interactive (TTWO) flashed a continuation pocket pivot on Friday on higher, but just slightly below-average, volume. The company is expected to report earnings on November 7, however.
Vertex Pharmaceuticals (VRTX) was removed from the list earlier in the week after it had violated its 50-dma. VRTX is a biotech and, given the way it trades, is subject to greater volatility, thus such a violation is more likely to result in removing the stock from the Focus List. Note, however, that the stock displayed action on Friday that is very typical for this market when individual stocks breakdown and appear all but lost. VRTX had broken down about 10% over the first four days of this past week, posting the fourth day of the decline on Thursday after reporting earnings Wednesday after the close. It closed mid-range that day on heavy volume. On Friday, VRTX opened to the downside, but then turned and rallied back up through the two lows of the prior failed double-bottom base at 147.18 and 147.30.
This is a typical undercut & rally (U&R) long set-up where the stock is triggered as a long entry once it moves back up through the 147.30 low, using that low as a selling guide. By the close on Friday, VRTX reached 150.11, making for a reasonable U&R long trade. The stock may have legs up to as far as the 50-dma from here. At that point failure at the 50-dma would cause the stock to become a short-sale target, while any move back up through the 50-dma could trigger another long entry based on the moving average undercut & rally (MAU&R) long set-up.