Sabrient Select Opportunity Virtual Portfolio

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Sabrient Select Opportunity Virtual Portfolio

The Week Ahead
Courtesy of Scott Martindale at Sabrient

I must admit that the market has shown impressive resiliency. The week before last, it seemed to be on a roll, with the SPY retaking its 50-day moving average and setting its sights on the 200-day, before rolling over and looking quite weak. Then last week, the bulls came out in force, choosing to focus on the better economic news and earnings reports rather than the weaker ones to support the market and send the shorts running for cover. The week closed very bullishly.

However, the SPY is now bumping up against the top of a downward channel that has been forming since early May, which also happens to coincide with the important 200-day moving average. Furthermore, it appears to be forming a bear flag within the channel.

All in all, it appears that a cautious approach is still in order as the market has some significant hurdles to cross. In fact, although we all hope for a directional market to trade (whether up or down), it is likely that the market will stay mired in choppy uncertainty for the foreseeable future. Thus, it is important that we keep both long and short positions in play.

Last week, we closed another 1/3 of long position XRTX into strength and added short positions in MON and FHN. Unfortunately, we stopped out of MON and TEX when they closed above my mental stop. Although CCI also closed above my mental stop on Friday, I elected to give it a bit more room since it is now in a zone of heavy resistance.

Open Positions

Going into the week, we have two long positions and two short positions.

LONGS:

We are still long a half position in Humana (HUM) from $48.75. The stock closed Friday at $45.62. It is rated STRONG BUY in the Sabrient Ratings Algorithm, and carries an Outlook Score of 99.7, a Growth Score of 91, and Momentum Score of 93. 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 long 1/3 of the original position in Xyratex (XRTX) from $12.30. The stock closed Friday at $13.85. It is rated STRONG BUY in the Sabrient Ratings Algorithm, and carries solid scores across the board, including the top Outlook Score of 100, Value Score of 83, and a Growth Score of 80. I will move up the mental stop to a close below $12.90.

SHORTS:

We are short a full position in Crown Castle International (CCI) from $37.46, although those who got in a bit late likely have a better (higher) entry price. The stock closed Friday at $39.56, which is above my mental stop of $38.90. However, I decided to give it some more room when I noticed that the $39.50-40.00 range looks like a very strong area of long-term resistance. CCI is rated STRONG SELL by the Sabrient Ratings Algorithm and carries a Company Outlook Score of 1, and a Value Score of less than 1. I have it on a short leash, and will close it if it sustains a move above $40.00.

We are short a full position in First Horizon National (FHN) from $11.23. The stock closed Friday at $11.48. FHN is rated SELL by the Sabrient Ratings Algorithm and carries a Company Outlook Score of 4, and a Growth Score of 31. I have a tight mental stop in place for a close above $11.79.

Watch List

LONGS:

Some stocks that I have on my Buy watch list include the following: