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GLOBAL OUTLOOK

Downtrend:

Rally Attempt:

Confirmed Uptrend:

Uptrend Under Pressure: /span>

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Market View

The U.S. market is in an Uptrend Under Pressure. The S&P 500 and Nasdaq continue to whipsaw above the October 29 low, but below resistance along the 200-DMA. Distribution stands at two days on the S&P 500 and one on the Nasdaq. No clear trend has yet to develop with the majority of growth ideas still consolidating. Breadth remains poor with defensive sec- tors continuing to lead and nearly 300 S&P 500 stocks still trading below their respective 200-DMA. Given this backdrop, a cautious approach is warranted. Focus only on high relative strength ideas consistently trading above their respective 50- DMA, while reducing risk in ideas with RS lines at or near new lows. To gain conviction, we will need to see the major aver- ages tighten up, regain moving average support, and leadership to broaden outside of defensive sectors. Stocks on our U.S. Focus List: Current Sentiment Our USFL of 44 ideas lost 2.3% on average this week, underperforming the S&P 500 (-1.6%) and the Nasdaq (-2.2%). Actionable Focus List ideas: Aon ( AON ), Canada Goose ( GOOS ), Chefs' Warehouse ( CHEF ), Ciena ( CIEN ), Edwards Lifesciences ( EW ), Fabrinet ( FN ), Fidelity Natl Info Svcs ( FIS ), Horizon Pharma ( HZNP ), Planet Fitness ( PLNT ), Procter & Gamble ( PG ), RBC Bearings ( ROLL ), Twilio ( TWLO ), Ulta Beauty ( ULTA ), Unitedhealth ( UNH ), Wright Medical ( WMGI ), Zoe- tis ( ZTS ) USFL ideas weekly earnings line-up: Monday: Close: INTU By Sector Consumer Staple ideas on the U.S. Focus List led this week. CHEF continues to trend higher off its 50-DMAand PG is now testing a new all-time high. MKC and LW, despite being extended from their prior pivots, remain at all-time highs. No other trends developed this week outside of Consumer Staple. Technology, Health Care, and Retail ideas traded in mixed fash- ion. Within Retail, ULTA is hitting new highs, while XLNX, FN, and CIEN continue to trade at or near new highs with Tech- nology. Within Health Care, EW, ZTS, HZNP, WMGI, and UNH held their respective 50-DMA, while VRTX and PRAH both broke below that same level of support. New Ideas or Deletions We removed Idexx Labs ( IDXX ), Centennial Res ( CDEV ), Worldpay ( WP ), Global Payments ( GPN ), and S S & C Tech ( SSNC ) from the U.S. Focus List this week.

MARKET VIEW

The U.S. market is in an Uptrend Under Pressure. The S&P 500 and Nasdaq continue to whipsaw above the October 29
low, but below resistance along the 200-DMA. Distribution stands at two days on the S&P 500 and one on the Nasdaq. No

clear trend has yet to develop with the majority of growth ideas still consolidating. Breadth remains poor with defensive sec-
tors continuing to lead and nearly 300 S&P 500 stocks still trading below their respective 200-DMA. Given this backdrop, a

cautious approach is warranted. Focus only on high relative strength ideas consistently trading above their respective 50-

DMA, while reducing risk in ideas with RS lines at or near new lows. To gain conviction, we will need to see the major aver-
ages tighten up, regain moving average support, and leadership to broaden outside of defensive sectors.

Stocks on our U.S. Focus List: Current Sentiment
Our USFL of 44 ideas lost 2.3% on average this week, underperforming the S&P 500 (-1.6%) and the Nasdaq (-2.2%).
Actionable Focus List ideas: Aon ( AON ), Canada Goose ( GOOS ), Chefs’ Warehouse ( CHEF ), Ciena ( CIEN ), Edwards
Lifesciences ( EW ), Fabrinet ( FN ), Fidelity Natl Info Svcs ( FIS ), Horizon Pharma ( HZNP ), Planet Fitness ( PLNT ), Procter &

Gamble ( PG ), RBC Bearings ( ROLL ), Twilio ( TWLO ), Ulta Beauty ( ULTA ), Unitedhealth ( UNH ), Wright Medical ( WMGI ), Zoe-
tis ( ZTS )

USFL ideas weekly earnings line-up:
Monday: Close: INTU
By Sector
Consumer Staple ideas on the U.S. Focus List led this week. CHEF continues to trend higher off its 50-DMAand PG is now
testing a new all-time high. MKC and LW, despite being extended from their prior pivots, remain at all-time highs. No other

trends developed this week outside of Consumer Staple. Technology, Health Care, and Retail ideas traded in mixed fash-
ion. Within Retail, ULTA is hitting new highs, while XLNX, FN, and CIEN continue to trade at or near new highs with Tech-
nology. Within Health Care, EW, ZTS, HZNP, WMGI, and UNH held their respective 50-DMA, while VRTX and PRAH both

broke below that same level of support.
New Ideas or Deletions
We removed Idexx Labs ( IDXX ), Centennial Res ( CDEV ), Worldpay ( WP ), Global Payments ( GPN ), and S S & C Tech ( SSNC )
from the U.S. Focus List this week.

The U.S. market is in a Confirmed Uptrend. The S&P 500 and Nasdaq staged a Day 7 follow-through day ( FTD ) on
Wednesday, rising more than 2% on above average volume. The FTD, however, is beginning to show signs of
failing following poor technical action on Friday. The Nasdaq closed back below its 200-DMA, while the S&P
500 retraced the FTD move and is now testing support at its 200-DMA. It is not uncommon to see near-term
profit taking shortly after a FTD given the size and quickness of the move off the bottom, however, in order to
stay constructive, we will need to see support come back into both the major averages and leading ideas alike
over the next few sessions. Further downside in both the S&P 500 and Nasdaq, coupled with failed breakouts in
leading ideas, will result in a failed FTD. Our recommendation remains the same. Take a gradual and selective
approach to increasing risk, buying only high-quality ideas that have held up well, as we remain in an overall
trendless and choppy market environment.
Stocks on our U.S. Focus List: Current Sentiment

Our USFL of 49 ideas gained 1.1% on average this week, underperforming the S&P 500 ( +2.1% ) but outper-
forming the Nasdaq ( +0.7% ).

Actionable Focus List ideas: Aon ( AON ), Chefs’ Warehouse ( CHEF ), Ciena ( CIEN ), Edwards Lifesciences ( EW ), Fab-
rinet ( FN ), Healthequity ( HQY ), Horizon Pharma ( HZNP ), Illumina ( ILMN ), Microsoft ( MSFT ), Nomad Foods

( NOMD ), Paypal ( PYPL ), Planet Fitness ( PLNT ), PRA Health Sciences ( PRAH ), Procter & Gamble ( PG ), RBC Bear-
ings ( ROLL ), Twilio ( TWLO ), Ulta Beauty ( ULTA ), Unitedhealth ( UNH ), Vertex ( VRTX ), Visa ( V ), Wright Medical

( WMGI ), Zoetis ( ZTS )
By Sector
Health Care ideas led this week. New additions HZNP and WMGI broke out from early stage bases,
while UNH and ZTS broke into new highs on the follow-through day. PRAH and EW regained their respective
50-DMA, while ILMN and VRTX are now building the right side of new bases. Consumer Staple ideas remain
resilient continuing to make new highs each session. LW, MKC, and PG continue to trend into higher highs,
while NOMD and CHEF both regained their respective 50-DMA following earnings results. Lower beta Financial
names also continue to hold up well. AON is making new highs, while MA, PYPL, FIS, and V are all forming the
right side of new bases. The action within Technology has been mixed. New ideas TWLO and FN broke into new
highs post earnings, while PAYC, GOOGL, NOW, CRM, and SSNC continue to consolidate in choppy fashion.
New Ideas or Deletions
We added Aon ( AON ), Horizon Pharma ( HZNP ), Microsoft ( MSFT ), Twilio ( TWLO ), Paypal
( PYPL), Fabrinet ( FN ), Ulta Beauty ( ULTA ), Wright Medical ( WMGI ), and Ciena ( CIEN ), and removed Match
( MTCH ) from the U.S. Focus List this week.

The U.S. market is in a Rally Attempt. The S&P 500 and Nasdaq have now held above the October 29 intraday

low (S&P 500: 2,603; Nasdaq: 6,922) for four sessions. We are now looking for a follow-through day ( FTD ) be-
fore shifting the market into a Confirmed Uptrend. Currently, both indices are hitting resistance just under their

respective 200-DMA. Should the indices clear above that level next week, the next level of resistance will be the
50-DMA, which is ~5% above current levels. Overall, we still believe it is too early to increase risk in the market,
given that the majority of ideas are still repairing themselves technically. Just 12 (~29%) of 41 U.S. Focus List
ideas are trading above their respective 50-DMA, while only 114 stocks within the S&P 500 are trading above
that level. If we get a FTD, our recommendation will be to gradually increase risk, committing capital to only

high relative strength ideas that have recovered the quickest and have reached risk optimal entry points. We be-
lieve the market will provide additional opportunities to buy growth ideas as it progresses higher and through

the multiple levels of resistance that still remain. Remain patient for now, but be ready to buy a few actionable
U.S. Focus List ideas when and if we get that FTD.

Stocks on our U.S. Focus List: Current Sentiment
Our USFL of 41 ideas gained 3.9% on average this week, outperforming the S&P 500 ( +2.4% ) and the Nasdaq
( +2.6% ).
Actionable Focus List Ideas: Chefs’ Warehouse ( CHEF ), Healthequity ( HQY ), Procter & Gamble ( PG ), Quantenna
Communications ( QTNA ), Xilinx ( XLNX ), Zoetis ( ZTS )
USFL ideas weekly earnings line-up:
Monday: Close: CDEV
Tuesday: Close: MTCH, PLNT
Wednesday: Close: SQ
Thursday: Open: WP
By Sector
Technology recovered this week, with multiple ideas rebounding from oversold levels. Despite the rally, most
ideas are still consolidating and have yet to reach ideal pivot points. XLNX is the strongest, breaking out into new
highs, while QTNA regained its 50-DMA and is actionable as an early aggressive entry. VEEV and INTU found
support at their respective 200-DMA and are still basing overall. Capital Equipment ideas also recovered, with
ROLL breaking into new highs post earnings and HQY now constructively forming the right side of a new base.

SECTOR SUMMARY

Key points:

Our outlook on U.S. markets has turned cautious for three primary reasons.

First, U.S. markets were moved to an Uptrend Under Pressure on November 12 after heavy selling pressure hit the indices following the November 7 follow-through day.

Second, the long-term uptrend of growth sectors, specifically Technology, Health Care, and Retail, continues to weaken over the last four to eight weeks. A few key industry group ETFs that we monitor are testing or have broken below long-term support at their 200-DMA. The ETF charts of software ( IGV ), semiconductors ( SOXX ), and med-tech ( IHI ) are below.

And finally, defensive groups, including Staple, Utility, and Telecoms, are leading over the short term. Actionable ideas include: China Telecom ( CHA ), Rogers ( RCI ), Shenandoah ( SHEN ), Puxin ( NEW ), NRG Energy ( NRG ), OGE Energy ( OGE ), Evergy ( EVRG ), Atmos ( ATO ), One Gas ( OGS ), American Water Works ( AWK ), American States Water ( AWR ), Coca Cola European ( CCEP ), Coca Cola ( KO ), Helen Of Troy ( HELE ), Procter & Gamble ( PG ).

Key points:

U.S. indices still hold a wide lead year-to-date versus global ETFs ( EFA, EEM, AAXJ, IEV ), but the lead has stopped stretching over the past two months.

Despite slightly better international market action, U.S. indices are much more near highs  and therefore have seen a bigger uptick in the number of breakouts over two weeks.

This has led to more U.S. Focus List additions ( 8 ) than international ( 4 ) this week.

The theme of additions in the U.S. is non-bank Financials, Tech (both software and hardware), and medical products.

The theme of additions internationally is Staples and Banks.

Some highlights from the report:

The rollout of 5G wireless technology is creating a new, multi-year capex cycle in the telecom industry. We anticipate that this new cycle will not only trigger a return to growth for the network equipment industry, but also positively impact a select list of semiconductor companies in our coverage.

Currently, 5G plays with the best mix of fundamental and technical ratings and rankings include Focus List-rated Xilinx ( XLNX ), as well as Ciena ( CIEN ), Ericsson ( ERIC ), Nokia ( NOK ) and Acacia ( ACIA ).

The attached report accompanies Romeo Alvarez’ webinar on the rollout of 5G on Thursday, November 8 at 8am PT/11am ET. Please register now.

ECON SUMMARY

Q3 GDP advance estimate takes a downturn.
The Bureau of Economic Analysis released its Q3 preliminary estimate for real GDP at 3.5% y/y, a steep decline from
the four-year high figure of 4.2% in September. Net trade, which made the highest contribution in the last quarter,
turned into the biggest drag in this quarter.

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.

EQUITY RESEARCH

Software

Cornelio Ash, Nov 19, 2018

Highlights:

The North American Software Index ( IGV ) remains under heavy distribution while trading below its 200-DMA. In October the IGV broke below a key level of support after trending higher for 22 consecutive months since January 2017.

Today we removed four key IGV constituents – ADBE, CRM, NOW, and PAYC – from the U.S. Focus List due to technical deterioration.

Key points:

Shares recently broke out of a nine-week consolidation on above average volume to an all-time high. The stock has a robust RS Rating of 99 and its RS line is heading north to an all-time high, in line with the market’s shift to a Confirmed Uptrend.

Increasing accumulation of shares is reflected by an improving A/D Rating of B+. Overall, consensus expects the Company’s top and bottom lines to have a ~40% CAGR from FY 2017 to FY 2020, translating to a >~1B operating profit by 2020, doubled from 2017.

Growth has been driven by the Company’s strong leadership in the growing hot pot segment, new product launches, and ecommerce expansion.

Consensus sees FY 2019 EPS growing 33%. Shares are trading at a PE forward 2019 of 32x.

FOCUS LISTS

Nov 16, 2018
The U.S. market is in an Uptrend Under Pressure. The S&P 500 and Nasdaq continue to whipsaw above the October 29 low, but below resistance along the 200-DMA. Distribution stands at two days on the S&P 500 and one on the Nasdaq. No clear trend has yet to develop with the majority of growth ideas still consolidating. Breadth remains poor with defensive sectors continuing to lead and nearly 300 S&P 500 stocks still trading below their respective 200-DMA. Given this backdrop, a cautious approach is warranted. Focus only on high relative strength ideas consistently trading above their respective 50-DMA, while reducing risk in ideas with RS lines at or near new lows.
Nov 16, 2018
On Thursday, the Stoxx 600 closed 0.019% below last Friday’s close and remains in a confirmed Uptrend This week, we moved Norway and Italy to an Uptrend Under Pressure after they saw another distribution day and closed below support We also upgraded Germany to a Confirmed Uptrend after the DAX closed up 1.30% and downgraded Luxembourg to a Downtrend after it closed below April lows. of the 17 indices we cover, mine are in a Confirmed Uptrend,five are in a Rally Attempt, two are in an Uptrend Under Pressure, and one is in a Downtrend.
Nov 16, 2018
Australia’s ASX All Ordinaries Index plunged 3.13% this week and remains in a Rally Attempt, trading 4.19% below its 50-DMA and 5.35% below its 200-DMA.
Nov 16, 2018
China’s CSI 300 Index was up 2.85% last week, compared with the +3% fall last week. The index was moved to an Uptrend Under Pressure from a Confirmed Uptrend after it displayed negative momentum. The index continues to face stiff resistance at the 50- DMA and we recommend investors remain cautious.
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.
Nov 16, 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.

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