O’NEIL RESEARCH

Ask an Analyst
 
Stocks Mentioned in Recent Research

GLOBAL OUTLOOK

Downtrend:

Rally Attempt:

Confirmed Uptrend:

Uptrend Under Pressure: /span>

Europe Detail
Asia Detail

FEATURED

Market View

The U.S. market is in a Downtrend. The S&P 500 and Nasdaq closed below their respective 200-DMA this week in heavy volume. Multiple leading ideas also broke below their 200-DMA or long-term price support and will now need to consolidate for a number of weeks before providing more risk optimal entry points. The U.S. Focus List count has fallen from a yearly high of 80 names to 63 today, with eight (13%) still trading below their respective 200-DMA and at risk of removal. Going forward, we will be looking for a follow- through day to occur above Thursday's intraday low before we recommend buying. This could happen as early as Wednesday, but until we see that occur, we recommend a defensive posture, avoiding new buys and selling ideas that have broken below long-term support. Stocks on our U.S. Focus List: Current Sentiment Our USFL of 63 ideas lost 5.8% on average this week, underperforming the S&P 500 ( -4.1% ) and the Nasdaq ( -3.7% ). Actionable Focus List ideas: Centennial Resource Dvlp ( CDEV ), Lamb Weston ( LW ). USFL ideas weekly earnings line-up: Monday: Open: SCHW Tuesday: Open: UNH Thursday: Close: TEAM By Sector All sectors sold off heavily this week. Technology took the brunt of the selling, with multiple U.S. Focus List ideas falling by double digits, including ALRM, BL, GRUB, NVDA, and ADSK. Tech ideas that held up the best include XLNX, ATVI, INTU, PANW, CRM, and ADBE, though all of these ideas did break short-term support and will need to consolidate over the next several weeks. Consumer Staple ideas held up the best on the list. MKC, LW, and NOMD are all trading within 10% of highs with RS lines moving higher. Select Retail ideas also held up well, including WING and OLLI, which both remain above their respective 50-DMA. New Ideas or Deletions We added Lamb Weston ( LW ) and removed Tyler Technologies ( TYL ), CarGurus ( CARG ), Q2 Holdings ( QTWO ), Paypal ( PYPL ), Splunk ( SPLK ), Workday ( WDAY ), Yelp ( YELP ), Semtech ( SMTC ), and Old Dominion Fght Line ( ODFL ) from the U.S. Focus List this week.

MARKET VIEW

The U.S. market is in a Downtrend. The S&P 500 and Nasdaq closed below their respective 200-DMA this week in heavy volume. Multiple leading ideas also broke below their 200-DMA or long-term price support and will now need to consolidate for a number of weeks before providing more risk optimal entry points. The U.S. Focus List count has fallen from a yearly high of 80 names to 63 today, with eight (13%) still trading below their respective 200-DMA and at risk of removal. Going forward, we will be looking for a follow- through day to occur above Thursday’s intraday low before we recommend buying. This could happen as early as Wednesday, but until we see that occur, we recommend a defensive posture, avoiding new buys and selling ideas that have broken below long-term support.

Stocks on our U.S. Focus List: Current Sentiment
Our USFL of 63 ideas lost 5.8% on average this week, underperforming the S&P 500 ( -4.1% ) and the Nasdaq ( -3.7% ).
Actionable Focus List ideas: Centennial Resource Dvlp ( CDEV ), Lamb Weston ( LW ).
USFL ideas weekly earnings line-up:
Monday: Open: SCHW
Tuesday: Open: UNH
Thursday: Close: TEAM

By Sector
All sectors sold off heavily this week. Technology took the brunt of the selling, with multiple U.S. Focus List ideas falling by double digits,
including ALRM, BL, GRUB, NVDA, and ADSK. Tech ideas that held up the best include XLNX, ATVI, INTU, PANW, CRM, and ADBE,
though all of these ideas did break short-term support and will need to consolidate over the next several weeks. Consumer Staple ideas
held up the best on the list. MKC, LW, and NOMD are all trading within 10% of highs with RS lines moving higher. Select Retail ideas also
held up well, including WING and OLLI, which both remain above their respective 50-DMA.
New Ideas or Deletions
We added Lamb Weston ( LW ) and removed Tyler Technologies ( TYL ), CarGurus ( CARG ), Q2 Holdings ( QTWO ), Paypal ( PYPL ), Splunk
( SPLK ), Workday ( WDAY ), Yelp ( YELP ), Semtech ( SMTC ), and Old Dominion Fght Line ( ODFL ) from the U.S. Focus List this week.

The U.S. market is in an Uptrend Under Pressure. The Nasdaq broke its 50-DMA on Thursday, a level that had
been holding as support for the last several months. Distribution increased and leading ideas pulled sharply
back off highs with several breaking down technically and subsequently being removed from the U.S. Focus List.
With the 100-DMA also undercut on Friday, the next level of support on the Nasdaq is now the July 30 low at
~7,600, before the 200-DMA. This poor technical action across the major averages and leading ideas alike

warrants a cautious approach until market conditions stabilize and price action tightens up. Therefore, our rec-
ommendation is to reduce risk by trimming ideas that have broken below moving average and/or price support,

while also locking in gains in ideas that have become well extended from prior pivot points.
Stocks on our U.S. Focus List: Current Sentiment
Our USFL of 71 ideas lost 4.5% on average this week, underperforming the S&P 500 ( -1% ) and the Nasdaq ( –
3.2% ).
Actionable Focus List ideas: Abiomed ( ABMD ), Activision Blizzard ( ATVI ), Adobe Systems ( ADBE ), Autodesk
( ADSK ), Centennial Resource Dvlp ( CDEV ), Continental Resources ( CLR ), Diamondback Energy ( FANG ), Fidelity
Natl Info Svcs ( FIS ), Intuit ( INTU ), Nvidia ( NVDA ), Vertex Pharmaceuticals ( VRTX ), Xilinx ( XLNX ), Yelp ( YELP ),
Zoetis ( ZTS )
Sector
Health Care and Technology ideas within the U.S. Focus List pulled back sharply this week. Breakouts failed in
EW and ALGN, while ABMD pulled back after testing all-time highs earlier in the week. ILMN and IDXX gapped
down below their respective 50-DMA. VRTX, UNH, and ZTS continue to hold up well. Within Technology, ideas
that had become extended over the past month pulled back the most. PAYC, AMD, TEAM, and VEEV are now
trading more than 10% off their highs, while BL, PANW, ALRM, WDAY, SMTC, NOW, SPLK, and QTNA among
others have broken below their respective 50-DMA. INTU, ADSK, and CRM continue to act well, trading above
their respective 50-DMA with relative strength lines trading near new highs. Bucking the trend were Consumer
Staple ideas MKC and CHEF. Both reached new highs despite the weak tape.
New Ideas or Deletions
We removed

(

), Monolithic Power Systems ( MPWR ), Arista Networks ( ANET ), and Lumentum ( LITE )
from the U.S. Focus List this week.

The U.S. market is in a Confirmed Uptrend. The S&P 500 and Nasdaq continue to hold above short-term sup-
port levels. The Nasdaq has an elevated distribution day count at seven, however, three days expire within four

sessions beginning next Thursday. To remain positive, we would like to see the Nasdaq hold above its 50-DMA
and avoid further distribution as expiration approaches. Underlying action among growth ideas has been strong

this past week. Multiple ideas have begun to emerge from consolidation and move back into new highs. Sixty-
four of the 75 (85%) U.S. Focus List ideas are trading above their respective 50-DMA, 49 (65%) are trading with-
in 5% of a new high, and 21 (28%) hit new all-time highs this week. We continue to recommend buying high

quality ideas as they find support at key moving averages or as they emerge from sound bases.
Stocks on our U.S. Focus List: Current Sentiment
Our USFL of 75 ideas gained 1.8% on average this week, outperforming the S&P 500 (-0.5%) and the Nasdaq
( +0.7% ).

Actionable Focus List ideas: Abiomed ( ABMD ), Activision Blizzard ( ATVI ), Adobe Systems ( ADBE ), Align Technolo-
gy ( ALGN ), Autodesk ( ADSK ), Canada Goose ( GOOS ), CarGurus ( CARG ), Centennial Resource Dvlp ( CDEV  ),

Continental Resources ( CLR ), Diamondback Energy ( FANG ), Envestnet ( ENV ), Fidelity Natl Info Svcs ( FIS ),
Fleetcor Technologies ( FLT ), Home Depot ( HD ), Intuit ( INTU ), Nextera Energy ( NEP ), Nomad Foods ( NOMD ),
Nvidia ( NVDA ), Old Dominion Freight Line ( ODFL ), Palo Alto Networks ( PANW ), Planet Fitness ( PLNT ), PRA
Health Sciences ( PRAH ), Realpage ( RP ), Splunk ( SPLK ), Vertex Pharmaceuticals ( VRTX ), Xilinx ( XLNX ), Yelp ( YELP ),
Zoetis ( ZTS )
Sector
Health Care ideas within the U.S. Focus List led this week. All nine ideas are trading within 3% of an all-time
high, with five reaching a new high this week. EW broke out earlier in the week and is now extended from an
ideal pivot, while VRTX is just slightly extended after breaking out this week. ABMD remains actionable and is

now testing new highs. Energy ideas fared well for a second straight week. CLR, CDEV, and FANG are all ap-
proaching new highs with all three still actionable. Technology ideas also did well this week. NVDA turned ac-
tionable after finding support at its 50-DMA, RP moved back into new highs after finding support at its 21-DMA,

and ATVI broke out of a cup pattern. Multiple other ideas, including TEAM, VEEV, MTCH, ALRM, AMD,
and PAYC, remain extended, but are holding near-term levels of support.

SECTOR SUMMARY

Key points:

 

The Russell Global had a clear breakdown this week. U.S. and major European markets, which had held better previously, all broke down this week.

Screening the entire investable universe of >$1B market cap and $3M ADV stocks (6,400 stocks), there are only 110 which are 1) within 10% of 52-week highs, 2) above their 200-DMA, 3) traded higher this week, 4) have traded higher in the trailing four weeks. Of these, 44 with the best charts are included below.

Some highlights from the report:

U.S.

Given our recent downgrade of the U.S. market to a Downtrend, we now recommend an equal-weight position from overweight within Medical Technology. The iShares U.S. Medical Devices ETF ( IHI ) has broken both its 50- and 100-DMA on heavy volume. We believe the next level of support is the 200-DMA, which is ~5% lower.

Multiple ideas across the U.S. Focus List have broken near-term levels of support warranting a cautious approach until technical profiles improve.

Fundamental profiles remain intact and valuation and growth remain in line with historical medians. The current 66 profitable companies above $500M in market cap within the Medical Product and Equipment industry groups have a five-year EPS median growth rate of 13% and a five-year median (high-to-low) P/E ratio range between 16 and 45. Over the next year, consensus calls for similar growth and valuation. Next fiscal year’s EPS is expected to grow by a median of 13% with a P/E ratio of 25x.

U.S. Focus List ideas: ABMD, ALGN, IDXX, ILMN, EW, PRAH; Stocks of Interest: WMGI, HAE

 EMEA

Health Care remains a long-term leading sector, but has come under severe selling pressure over the last two weeks due to general market weakness. We recommend a selective approach across the region with few growth ideas currently showing technical strength.

European Focus List idea:STMN.CH; Stock of Interest: ELKB.SE

 APAC

Health Care is outperforming over the last 26 weeks, but is now weakening over the last month. There are multiple stocks of interest in this region, as many ideas have strong fundamental profiles, despite weak technical profiles. We recommend a patient approach until market conditions improve before buying medical technology ideas within the region.

APAC Focus List ideas: [email protected], COH.AU, NAN.AU; Stocks of Interest:WXBO.HKMPS.HKTERU.JP

Key points:

With many global markets selling off sharply this week, focus on improving Relative Strength.

In the U.S., Energy, Cap Equipment, Health Care, Utility, and Transportation all have improving Relative Strength.

In terms of names, using a screen of >$1B market cap and $5M ADV, >=-8% off highs, above 50-DMA, >=70 RS Rating, >=+5 RS Rating from five weeks ago, >=5% current year sales growth, >=8% current and next year EPS growth, and at or near a reasonable entry point, we get 33 stocks that could be good candidates to help weather the recent storm while also providing upside should the market resume its uptrend.

ECON SUMMARY

Q2 GDP estimate unchanged:
The Bureau of Economic Analysis kept its Q2 third estimate for real GDP unchanged at 4.2% y/y, the highest growth
rate since the third quarter of 2014. Net trade made the highest contribution during the quarter, while inventories
posed the biggest drag.

Q2 GDP estimate revised up:
The Bureau of Economic Analysis released its Q2 second estimate for real GDP at 4.2% y/y, 10bps above the advance
Q1 real GDP.

Q2 GDP advance estimate released:
The Bureau of Economic Analysis has released its Q2 advance estimate for real GDP at 4.1% y/y, 190bps above the revised Q1 real GDP.

EQUITY RESEARCH

Argentina: Uptrend Under Pressure, six distribution days

Brazil: Confirmed Uptrend, one distribution day

Mexico: Downtrend

Global Laggards

Heetae Kim, Oct 11, 2018

Highlighted Charts

U.S.: C R H ( CRH ), B W X Technologies ( BWXT ), Plantronics ( PLT ),EQT ( EQT ), Firstcash ( FCFS ), Groupon ( GRPN ), Performance Food ( PFGC ), Finisar ( FNSR ), A M N Healthcare Svcs ( AMN ), Telefonica ( TEF ), Alaska Air ( ALK )

Developed: Johnson Matthey ( JMAT.GB; JMAT LN ), Publicis ( PUB.FR; PUB FP ), Nissin Foods ( NIFP.JP; 2897 JP ), Baytex Energy ( BTE.CA; BTE CN ), CYBG ( CYBG.GB; CYBG LN ), Inditex ( IND.ES; ITX SM ), Brother Industries ( [email protected]; 6448 JP ), International Consolidated Airlines ( IAG.GB; IAG LN )

Emerging: Sappi ( SAPJ.ZA; SAP SJ ), Catcher Technology ( CTH.TW; 2474 TT ), KT&G ( KTB.KR; 033780 KS ), CIMB (COMS.MY; CIMB MK), Quanta Computer (QUM.TW; 2382 TT)

Stocks worth focusing on in this week’s Global Laggards:

U.S.

Skechers USA ( SKX ) – Consumer Cyclical ( $4B market cap ) – manufactures lifestyle and performance footwear for men, women, and children.

SKX shares have traded below their 10- and 40-WMA since April. The 10-WMA is in a downtrend and has recently served as a level of key resistance. Short-term support is at $23.90 (7% downside) and long-term support is at $18.81 (26% downside).

RS line has been in a downtrend and its RS Rating is poor at 12. A/D Rating has been deteriorating and turned negative two weeks ago (money outflow).

In Q2 (reported on 07/19), SKX EPS miss expectations by almost 30% on higher SG&A than expected. Q2 revenue growth of 11% decelerated substantially from Q1 ( +17% ) and Q4 2017 ( +27% ) due to weaker domestic wholesale growth.

Consensus expects the weak trend in domestic wholesale and higher SG&A to persist in H2. Estimates call for a 12% and 14% EPS decline in Q3 and Q4, respectively.

Following the downgrade of Hong Kong on Monday (October 8), we are also downgrading Mainland China markets to a Downtrend after a 4.8% loss in the CSI 300 and the undercut of prior lows made in September (see Datagraph). Similar to the Hang Seng, the 50-DMA continues to serve as consistent resistance. The sharpness of today’s loss could be indicative of the beginning of capitulation, where greater and more disorderly declines occur in the short term. Furthermore, with an increase in downside action globally, we have become more bearish on nearly all markets as the majority have shifted into correction recently. We continue to recommend a defensive approach if raising cash is not an option.

 

Both the Shanghai and Shenzhen Composites have already declined below 2016 lows with no clear near-term support until 2014 levels, suggesting 13% or more downside. We view support for the CSI 300 near 2016 lows (~2,800) with ~10% downside.

FOCUS LISTS

Oct 12, 2018
The U.S. market is in an Uptrend Under Pressure. The Nasdaq broke its 50-DMA on Thursday, a level that had been holding as support for the last several months. Distribution increased and leading ideas pulled sharply back off highs with several breaking down technically and subsequently being removed from the U.S. Focus List. With the 100-DMA also undercut on Friday, the next level of support on the Nasdaq is now the July 30 low at ~7,600, before the 200-DMA. This poor technical action across the major averages and leading ideas alike warrants a cautious approach until market conditions stabilize and price action tightens up. Therefore, our recommendation is to reduce risk by trimming ideas that have broken below moving average and/or price support, while also locking in gains in ideas that have become well extended from prior pivot points.
Oct 12, 2018
The Stoxx 600 closed 4.45% lower on a weekly basis on Thursday. Concerns over Italy’s deficit and China’s economic slowdown pushed markets downward for most of the week. We downgraded Portugal and Ireland to a Downtrend last Friday; Italy, Netherlands, the U.K., and the Stoxx 600 Monday; Germany and Belgium Tuesday; France and Sweden Wednesday; Austria, Spain, and Switzerland yesterday. Norway was downgraded to an Uptrend Under Pressure yesterday. Of the 17 indices we cover, 15 are in a Downtrend and only Luxembourg and Norway remain in an Uptrend Under Pressure. This morning, markets are showing signs of recovery. The Stoxx 600 gained 0.7%, while Germany’s DAX 30, the U.K.’s FTSE 100, and France’s CAC 40 rose 1.04%, 0.35%, and 0.94%, respectively, in early trading.
Oct 12, 2018
Australia’s ASX All Ordinaries Index fell 4.67% this week. On Tuesday, the index fell 1.01% on above average volume, breaching its 200-DMA for the first time since April and continuing to trend downward. We moved the index from an Uptrend Under Pressure to a Downtrend.
Oct 12, 2018
China’s CSI 300 Index dropped 7.8% last week and was moved to a Downtrend from an Uptrend Under Pressure. It breached its 50- DMA recently and continues to trend below its 200-DMA.
Sep 07, 2018
Saudi Arabian Mining Company (
) is one of the leading mining and metals companies in the Kingdom of Saudi Arabia. The Company's key catalysts include production expansion of aluminium and phosphate and rising commodity prices.
Oct 12, 2018

WHITE PAPERS

EPS Rank Study

Oct 12, 2016

In this paper, we examine the effectiveness of using William O’Neil +Co.’s proprietary Earnings Per Share (EPS) Rank as a primary factor in managing a portfolio of U.S. equities. Our study included nearly 12,000 U.S. equities from January 1995 to December 2015.

Entitled Content

If you would like access to this content, please click the button below to have your Account Executive contact you.

Requested by

How should we contact you?