by Mike Cintolo, editor Cabot Market Letter
The majority of potential investors are still paying more attention to
the economic and political troubles of the world than they are to the
stock market. Indeed, almost no one in the market is looking for really
big gains today. We think they should.
But we've had a couple of
rare signals of extreme market strength in recent weeks; the odds
strongly favor higher prices ahead. Here's a look at some tech stocks we
rate as buys: Amazon.com (AMZN), eBay (EBAY), Equinix (EQIX) and Facebook (FB).
[Related -Level Watching and Swing Trade Planning for Amazon (AMZN)]
As to the general market, we note that we have seen a rare Breadth
Thrust; the broad market went from very oversold to very overbought in
just a two-week period.
Historically, that has portended great
gains for the market in the months ahead (an average S&P 500 gain of
15% six months later) ... and just as important to us, it has remained a
rare occurrence. It was just the eighth signal in 32 years!
was bullish enough, but then, on the heels of the Fiscal Cliff
settlement, the market displayed another rare show of power: For two
straight days, the total up volume on the NYSE outpaced total down
volume by greater than 9-to-1.
[Related -Fusion-IO, Inc. (FIO): Can Fusion-IO Q2 Results Cheer Street?]
Since 1950, this Volume Blast-Off indicator has happened just six other times (the last time in January 1987).
surprisingly, such overwhelming strength has led to superb results:
According to Sundial Capital Research, after these previous signals, the
S&P 500 was up an average of 6% one month later, up 13% three
months later; and up 19% six months out.
has been all over the map in recent weeks, first pushing above key
resistance, then getting caught upin the late-December Fiscal Cliff
panic, and now snapping back.
Helping out was some bullish analyst commentary; the analyst believes global e-commerce will double to $1
trillion by 2016, with Amazon possibly tripling sales during that time!
interesting fact is that 40% of all items sold on Amazon are from
third-party sellers, who pay to ship the product, leaving Amazon with
"free" commissions. We'll stay on buy, but some consolidation could be
eBay isn't on the lips of every
investor because it's more of a steady performer. But that's fine with
us! The stock has done well recently, spiking toward new-high ground
before pausing for breath.
The next big event will be earnings,
which are due out next Wednesday evening (January 16); a break below
49-50 on the downside could have us booking our profit, but we're
optimistic the firm will have bullish enough news to keep the stock's
overall uptrend intact. If you buy ahead of the report, we advise
keeping your position smaller than normal.
has been quiet on the news front for a couple of weeks, but that hasn't
stopped the stock from nosing into new-high ground.
volume on the recent push higherhas been light, and earnings are likely
out in the beginning of February, so EQIX might take a breather here.
we think demand for this firm's various interconnection services
remains robust, and that demand could even accelerate if businesses
begin to put some of their record cash hoards to work (especially for
There's also rumors that the firm's switch
to a REIT structure could occur in 2014, a year ahead of schedule. Look
for a pullback of a few points to establish a new position.
needs no introduction; it's the most visited website in the world, so
if you don't use it you surely know someone who does.
question since the company came public last May is whether or not
management, led by CEO Mark Zuckerberg, can truly monetize its vast
Initially, the answer was no, but more and more big
investors are coming around to the view that Facebook is succeeding in
its mobile strategy—mobile ads made up 14% of total ad revenue in the
third quarter and indications are that figure is growing rapidly.
told, we think the company's combination of 30%-ish revenue and
earnings growth should keep hundreds of institutional investors
Stock-wise, after a quick, big-volume rally in
late-November, FB pulled back for a month and is now resuming its
upmove. We think it's buyable here, with a mental stop in the 25 area.