Here’s the weekly update from Sabrient’s Scott Martindale for the premium Sabrient Select Opportunity Virtual Portfolio. We’ve been posting weekly newsletters along with intra-week updates when Scott adds, decreases or closes a position. For a free trial – so you can follow SSOP in a more timely manner – click here and sign up. The Dark Horse Hedge Virtual Portfolio is free and can be followed here and in the Sabrient section at PSW. – Ilene
Sabrient Select Opportunity Virtual Portfolio
Once again, the market has stared into the abyss and found a reason to rally. Perhaps it’s the idea of a waterfall decline that rallies the troops (i.e., the big institutional money). Or perhaps there’s just no place else to invest for solid returns, so the money moves back into the market when the fear level hits minor peaks.
Whatever the reason, the technicals reversed dramatically right after the dreaded "death cross" occurred, in which the S&P500’s 50-day moving average crossed down through the longer-term 200-day MA. Notably, this did not occur in the other major averages (including the Dow, Russell 2000, and Nasdaq Composite, Nasdaq 100, S&P400). The SPY chart shows that the MACD is looking relatively healthy for the moment, and although the 2010 lows around 105 were violated pretty severely, it came back impressively, fueled by a classic short-covering rally, and is now ready to test resistance from the downtrend line of a potentially bearish descending triangle. This resistance might be formidable, and the 50/200 bearish crossover is still intact, so we must be cautious about jumping on any bullish bandwagons.
Mutual fund cash is low, and although cash in company coffers is at all-time highs, they are showing little inclination to spend it yet. So, fuel for much more near-term upside might be scarce.
Last week, the Select Opportunity Virtual Portfolio added a long position in XRTX, which proved timely as we were able to take advantage of the rally and quickly book 10% profits on 1/3 of the position.
Going into the week, we have two long positions and one short position.
LONGS:
We are still long a half position in Humana (HUM) from $48.75. The stock closed Friday at $46.20. It is rated STRONG BUY in the Sabrient Ratings Algorithm, and carries an Outlook Score of 99 and Growth and Momentum Scores of 90. I only closed out half of the original position when it violated my mental stop loss because I wanted to maintain at least one long position in the virtual portfolio to somewhat balance the heavy short exposure, and HUM offers a desirable combination of solid fundamentals and defensive characteristics. I do not have a firm stop loss at this time, but will continue to monitor the position closely.
We are 2/3 of the original position in Xyratex (XRTX) from $12.30. The stock closed Friday at $13.74. It is rated STRONG BUY in the Sabrient Ratings Algorithm, and carries solid scores across the board, including an Outlook Score of 100, Value Score of 80, Growth Score of 73, and Momentum Score of 86. I have a mental stop at the entry price of $12.30.
SHORTS:
We are short 2/3 of the original position in Host Hotels & Resorts (HST) from $14.80. The stock closed Friday at $14.21. HST is now rated HOLD by the Sabrient Ratings Algorithm and carries a Company Outlook Score of 6, Value Score of 11, and Growth Score of 18. On Friday, it violated my mental stop of a closing price above $14.05, so I will be watching Monday morning price action to possibly close the position to lock in gains.
Watch List
LONGS:
Some stocks that I have on my Buy watch list include the following:
DECK
SNDK
STX
AXS
TRW
SAFM
CTB
JRCC
ABV
CFI
NEM
ECPG
JBL
LZ
NTSC
SHORTS:
Some stocks that I have as Short candidates are the following:
VMC
MWW
TEX
FHN
MON
SPG
JOE
AMAG
CCI
GDP
ATLS
SBAC
GLBC
RAIL
ONXX
ARII
STI
BOOM
AMZN
I will be watching the markets for buy and sell opportunities.
Regards,
Scott Martindale
