The Gilmo Report

February 5, 2017

February 4, 2017

Friday’s jobs number came in at a “blistering” 227,000 jobs vs. estimates of 177,000, sending the market blasting back to the upside. The Dow Jones Industrials Index regained the magical 20,000 level and the NASDAQ Composite logged a new all-time closing high.

Despite the strong index action on Friday, the action among individual stocks has been mixed. Unless something is gapping up on earnings or staging some sort of wild upside reversal after selling off, most stocks appear to be moving to and fro without making any substantial upside. There are a few exceptions, but only a very few. Friday’s rally was led by financials, many of which were looking quite negative on Thursday. One example would be Charles Schwab Co. (SCHW), which gapped down through its 50-day moving average on Thursday on heavy selling volume.

It then rebounded on Friday on news regarding the peeling back of Dodd-Frank, along with other financials. However, note the stalling action at the 50-day line. In my view, this thing is a short right here using the high of Friday at 40.68 as a guide for a tight upside stop.

 

GR020517-SCHW

 

Goldman Sachs (GS), on the other hand, blasted through its 50-day moving average on a strong-volume gap-up move on Friday. This would qualify as a pocket pivot coming up through the confluence of the 10-day, 20-day, and 50-day moving averages on big buying interest.

 

GR020517-GS

 

In the midst of all of this mixed action, the Dow essentially ended the week right where it started. Volume was lighter on Friday as the index now tests its recent highs. For the most part, the Dow never broke below the lows of its prior six-week price range leading into last week’s breakout to new highs.

 

GR020517-$INDU

 

The S&P 500 Index, not shown, is sitting about three points below its all-time high as is the NASDAQ Composite Index. However, the NASDAQ posted a new all-time closing high on Friday on lighter volume, and remains the de facto leading index in the current market rally. But while the indexes look strong, making big money in this market in individual stocks is a much more difficult proposition.

 

GR020517-$COMPQ

 

Amazon.com (AMZN) illustrates that even as the NASDAQ makes a new all-time closing high, some of its component stocks are moving in the opposite direction, AMZN came in with lighter holiday sales than expected when it reported earnings Thursday after the close, and promptly broke below its 20-day moving average.

On its face this looks like the initial breakdown in a potential late-stage base failure. It is possible to look at this as a potential shortable gap-down situation, using the 20-day line at 814.82 or the Friday intraday high at 818.30 as guides for upside stops. Otherwise, if the Ugly Duckling rears his ugly head on this one, a strong move back up through the 20-day line could enable the stock to set up on the long side again. Based on the face value of Friday’s action, however, the stock looks like a short as long as it cannot regain the 20-day moving average.

 

GR020517-AMZN

 

Facebook (FB) also flopped after earnings, although not as severely as AMZN, to be sure. After issuing what was initially construed as a positive report on Wednesday after the close, the stock gapped up above 137 in after-hours trade. However, by the conclusion of after-hours trading on Wednesday, the stock was right back where it had closed the regular session.

It opened up on Friday at the UNCH line and then rallied above 135 before reversing and turning back to the downside. Thus a new-high breakout attempt failed on heavy selling volume. On Friday FB again tried to rally, but only got as far as the 132.85 level before turning tail and closing roughly flat on above-average volume.

It ended the day 13 cents below its 10-day moving average, and while Friday’s volume was above average, it was also much lower than Thursday’s heavy selling levels. Whether or not this minor buoyancy was due to a strong general market index move on Friday remains to be seen. If the stock blows further below the 10-day line this coming week, then it could easily morph into a possible late-stage, failed-base (LSFB) short-sale set-up. That remains an open question, however, and it will be a matter of seeing how FB handles itself in the coming days.

The one thing about FB that might work in its favor is the fact that it sells at 24 times forward estimates, and for that reason isn’t priced excessively. What works against the stock is that it is widely-owned, so there is always the possibility that everyone who wants to be in the stock already is. That sort of thing is likely what drove the stock’s last decline after it failed to hold up in a new-high price territory.

 

GR020517-FB

 

Microsoft (MSFT) is another big-stock NASDAQ leader that hasn’t done much to help the cause by failing on a recent buyable gap-up and base breakout move. The stock dipped below its 20-day moving average on heavy selling volume Thursday, but found support near the 50-day moving average.

This led to a small upside move that regained the 20-day moving average, but volume, while above-average, was lighter relative to the selling over the prior two days. Technically this could be viewed as a short-sale here using the 10-day line at 64.04 as a tight upside stop.

But in this position, the Ugly Duckling could rise from the market swamp and help push MSFT back up toward its prior highs. In this market, appearances can often be deceiving, and that has worked both ways. Stocks that look incredibly strong one day, as MSFT did six trading days ago, suddenly go flat and look incredibly ugly in short order. Such is the nature of this market, and it makes things difficult for most investors.

 

GR020517-MSFT

 

Alphabet (GOOGL) is another wayward child of the NASDAQ after reversing hard off of its peak last week on a big outside reversal to the downside on heavy selling volume. That took the stock down as far as the 50-day moving average, where it found support on Thursday on about average volume.

The ensuing bounce on Friday, helped along by the strong index rally, ran out of momentum at the 20-day moving average, however, and the stock closed at the lows of its daily range on light volume. Friday’s rally was shortable at the 20-day line, in my view. The stock can still be considered as shortable here using the 20-day line at 826.84 as a guide for a tight upside stop.

 

GR020517-GOOGL

 

So as we see four big-stock NASDAQ leaders, some of which are verging on former leader status, come under some pressure, we can see that Apple (AAPL) is still holding its buyable gap-up move of Wednesday. As I blogged Wednesday morning, the stock was actionable at that time as a BGU using the 127.01 intraday low as a tight selling guide.

AAPL never retested that low, and has held tight over the past two trading days as volume has dried up sharply. This looks like it has a reasonable chance of moving higher, and remains within buying range of Wednesday’s BGU using the 127.01 level as your out point.

 

GR020517-AAPL

 

Netflix (NFLX) still hasn’t moved much since its own buyable gap-up (BGU) of over two weeks ago. In the process, the stock has become squeaky tight along its 10-day moving average. Volume dried up on Friday to its lowest levels since the BGU. In my view, if NFLX is headed higher, it is revving to do so on the basis of this current tight voodoo action along the 10-day line. This remains in a buyable position using the 138.25 intraday low of the BGU day, less than 2% below Friday’s close, as your tight selling guide.

 

GR020517-NFLX

 

Priceline Group (PCLN), not shown, is holding along its 110-day moving average after running into some heavy selling volume around the $1,600 price level earlier in the week. Earnings are expected on February 15th, so my preference is to leave this alone and focus on the constructively acting stocks that have already announced earnings, such as NFLX and AAPL, for example.

Tesla Motors (TSLA) continues to work on what is so far a short bull flag along its 10-day moving average. Volume dried up on Friday to -55.1% below average as investors go into waiting mode ahead of this Wednesday’s expected earnings report. If one is long this from the pocket pivots down at the 50-day and 200-day moving averages in December and January, one perhaps has enough cushion to sit through earnings on Wednesday.

 

GR020517-TSLA

 

If you’re looking for schizoid action, look no further than U.S. Steel (X). The stock has now become notorious for alternating between looking quite strong one day to looking quite ugly the next, and then back again. On Wednesday after reporting earnings on Tuesday after the close, X sold off hard and moved to lower lows on very heavy selling volume.

Not to worry, however, as the stock immediately found its feet and rocketed back to the upside the very next day on even heavier buying volume. This qualified as yet another pocket pivot, of which there have been two others in this current base. On Friday, the stock actually held relatively tight, closing just below the 50-day moving average but above the 10-day and 20-day moving averages.

While there’s no guarantee that X won’t sell off again, its persistence in holding up within this base is somewhat impressive. On balance, upside volume has also come in higher than corresponding downside volume. So with earnings out of the way, I view this as buyable using the 10-day line at 37.11 as a tight selling guide.

 

GR020517-X

 

While other steels like Steel Dynamics (STLD) and AK Steel Holdings (AKS) are floundering badly, it may simply be that the market is taking the opportunity to sift out the better steels from the also-rans. Among these, I still like Allegheny Technologies (ATI) as a bona fide leader of the pack.

After posting a very strong buyable gap-up (BGU) move after earnings two weeks ago, ATI has held up in a tight flag formation. On Friday it finally met up with its 10-day moving average as volume dried up to -42% below average. In my view this puts the stock in a lower-risk entry position using the 10-day line or the lows of the current flag formation at 20.82 as a selling guide.

 

GR020517-ATI

 

Caterpillar (CAT) broke below its 50-day moving average on Thursday, a possibility I discussed in my Wednesday mid-week report that would turn the stock into a short-sale target at that point. On Friday the stock pushed back up toward its 50-day moving average, giving short-sellers another opportunity to hit the stock as it failed to hold and reversed to close down on above-average selling volume.

CAT remains in force as a short, using the 50-day line at 94.65 as a guide for a reasonably tight upside stop. As a failed recent breakout, CAT illustrates the difficulties that remain in this market. Such weak action in the face of a big index rally on Friday is typical of the bifurcated character we are seeing in some areas of the market.

 

GR020517-CAT

 

Hopefully the big-stock materials names don’t follow in CAT’s footsteps. Both Martin Marietta Materials (MLM) and Eagle Materials (EXP) are sitting at their 20-day moving averages after failing to hold the upside thrust they saw on breakout moves last week. While MLM, not shown, sits right at its 20-day line, putting in a lower-risk entry position using the 50-day line at 225.64 as a reasonably tight selling guide.

EXP, shown below, is actually holding its previous breakout whereas MLM has pulled back into its own base. Both stocks are, however, in lower-risk entry positions along their 20-day lines, and we can see that EXP in fact found some support at the line on Wednesday. That has sent the stock back up to the rising 10-day moving average on light volume. My view is that if you’re interested in acquiring shares of EXP, you try and enter as close to the 20-day line at 102.90 as possible, using that as your tight selling guide.

 

GR020517-EXP

 

The strongest-acting names on my long watch list this past week have been the cyber-security stocks. On Thursday after the close, both Fortinet (FTNT) and FireEye (FEYE) announced earnings and promptly moved in opposite directions. FTNT gapped 13.7% higher on heavy volume, while FEYE gapped down -15.7% on heavy volume.

For some reason, cyber-security names I’ve been discussing in recent reports like Palo Alto Networks (PANW), Barracuda Networks (CUDA), and CyberArk Software (CYBR) decided to focus on FTNT’s action and ignore FEYE’s.  Thus they all moved higher as they chose to express their sympathy with FTNT’s move.

Palo Alto Networks (PANW) had the biggest percentage move at 3.7% on Friday. As I wrote on Wednesday, the stock’s pullback into the 10-day line was buyable at that point. It held at the 10-day line on Thursday as volume dried up to voodoo levels. On Friday PANW then gapped higher on another pocket pivot move off the 10-day line. It would not be considered to be extended from the 10-day line since it had closed right at the 10-day line on Thursday. Bottom line: You had to be on this one on Thursday at the 10-day line, because it is now extended.

 

GR020517-PANW

 

CyberArk Software (CYBR), not shown, was already extended from its 10-day moving average by the time it moved higher in sympathy to FTNT on Friday. The company is expected to announce earnings on Thursday of this coming week after the close.

Barracuda Networks (CUDA) is another one of these schizoid stocks that likes to go off on long hikes into the deep, dark woods where lions and tigers and especially bears reside, and then return safely, as if nothing happened. The stock did this on Monday when it flipped out and made a break for its 40-week moving average on the weekly chart.

It then found support at that level and rallied back above its 50-day moving average on an undercut & rally move Tuesday. That was technically buyable using the prior 22.75 low in the pattern as your selling guide. Tuesday’s move also qualified as a second five-day pocket pivot in the pattern.

The low-volume pullback on Wednesday and Thursday put the stock into a lower-risk buy position, as I discussed in my Wednesday mid-week report. From there it rallied back up to the highs of the current three-week price range. Admittedly, jumping into CUDA at this point could be psychologically difficult based on what the stock had just done. On the other hand, keeping an entirely even psychological keel might have enabled one to pull the trigger when it needed to be pulled.

I don’t know if CUDA is just shaking out weak hands before it heads higher, or whether it will continue to give its shareholders periodic heart attacks. The bottom line, however, is that it remains buyable on pullbacks into the 10-day moving average at 23.28, using the 50-day line at 22.91 as a selling guide.

 

GR020517-CUDA

 

I would also refer you to the weekly chart of CUDA, which looks less junky than the volatile action you see on the daily chart. Here we observe supporting action at the 40-week moving average as weekly volume expanded slightly over the prior week. That is constructive action, at least on the weekly chart.

The trick here may be that if the rest of the cyber-security names keep rallying as they have been, and we see positive earnings reports from PANW and CYBR later this month, then CUDA could indeed move higher from here. The only question is whether it doesn’t shake out investors again before doing so! Hopefully, it has worked that tendency out of its system by now.

 

GR020517-CUDA Weekly

 

Meanwhile, we can see that the big-stock leader in the cyber-security space, Checkpoint Software (CHKP), is holding tight along its 10-day moving average. It also posted a single five-day pocket pivot at the 10-day line on Friday. If I had my druthers I’d rather look for some sort of funky pullback in the stock, perhaps down to the 20-day moving average at 95 as a very opportunistic entry point.

On the other hand, it could just power right through the $100 Century Mark, something the stock hasn’t done since Year 2000. I don’t know if 17 years is enough to reset the Livermore Century Mark Rule for the long side, but my guess is that if 17 years can’t do the trick, then nothing can! So, as another way of approaching CHKP, watch for a move through the $100 level.

 

GR020517-CHKP

 

When thinking about the more opportunistic strategy of waiting for a pullback to the 20-day line in CHKP, we can see how lurking in the tall grass waiting for just such a pullback to the 20-day line in Symantec (SYMC), which is the other big-stock cyber-security leader in this market, would have worked well. On Thursday the company gave earnings guidance and immediately sold off.

But it found support right at the 20-day moving average and bounced sharply back to the upside on heavy volume. So either you were lying in wait for the stock at the 20-day line or you weren’t. My guess is that most of you weren’t (I certainly wasn’t!), but this is the type of opportunistic entry one might look for in CHKP, should it occur.

I first discussed both CHKP and SYMC back in my report of January 15th. Since then, both stocks have been surprising leaders in an otherwise choppy market environment. But their strength as big-stock cyber-security leaders is also fueling improving and constructive action in the smaller names in the group, as we’ve seen in PANW, CUDA, and CYBR. You can add FTNT to that list as well.

 

GR020517-SYMC

 

Finally, one can also think about playing FTNT, not shown here on a chart as a bottom-fishing buyable gap-up (BFBGU), using the intraday low of Friday at 36.10 as a selling guide. My approach here would be to watch for any pullbacks toward the 36.10 as a potentially more opportunistic approach, but with the stock’s strong close on Friday it could simply continue higher. On balance, however, FTNT would appear to bode well for the group.

Optical names like Oclaro (OCLR) seem to be taking on the role of stocks that don’t want to go anywhere in this market. This is not unusual for any number of individual stocks, and can certainly be a source of frustration for investors in these names. OCLR, not shown here on a chart, remains stuck within a base after a breakout attempt last week that failed.

Ciena (CIEN), also not shown, is stuck in a base as well after failing on a base breakout attempt last week. Thus it looks alternately shortable and buyable within the pattern. The bottom line is that it is going nowhere fast.

The only stock in the group that has had any real upside thrust is Applied Optoelectronics (AAOI). After pulling down toward its 20-day moving average at the beginning of the week and finding support, the stock posted a new high on Friday as buying volume picked up slightly.

In this case, you have to avoid chasing the strength and look to enter on opportunistic pullbacks. This is the only way to operate in this market, and as I blogged on Friday morning, can generally have some positive near-term effects. Sometimes that’s all it has, but so far AAOI has shown some upside spunk. So any further pullbacks to the 20-day line at 29.59 should be watched for as potentially opportunistic entries.

 

GR020517-AAOI

 

Juniper Networks (JNPR) pushed past the 27.04 intraday high of its gap-down move six trading days ago on the daily chart, below, stopping out any would-be shorts at that point. The stock then pushed up into its 20-day moving average on Friday on weak volume. This might put it in a more optimal short-sale position right here using the 20-day line at 27.46 as a guide for a tight upside stop. The flip side of this is that the move two Fridays ago was just a big shakeout, and JNPR will soon regain its 50-day moving average in classic Ugly Duckling style.

But, a short-sale set-up has to be assessed in real-time, and this stalling and churning action at the 20-day line on light volume may be the end of the bounce for JNPR. At the very least, risk can be kept to a minimum, and if the stock shows a strong bid, there is always the option of flipping to the long side if the visceral evidence is there.

 

GR020517-JNPR

 

Veeva Systems (VEEV) helps to make the case for maintaining an opportunistic approach in this market. Buying along the recent lows would have finally been rewarded on Thursday when the stock posted a reasonably strong pocket pivot coming back up through the 10-day and 20-day moving averages.

Note that in this case VEEV tried to clear the 50-day line as well, but closed just below the line. Given that this is a roundabout type of pocket pivot (RAPP), I don’t require that it necessarily clear the 50-day line IF it is clearing the 10-day and 20-day lines in the process. We can see that VEEV then pushed up through and closed above the 50-day line on Friday.

While buying along the lows of the base around the 42 price level was feasible for followers of the Ugly Duckling, the stock remains in a buyable position right here. In this case one can use either the 10-day line at 42.73 or the recent lows along the 42 price level as selling guides. Earnings are not expected until March 7th.

 

GR020517-VEEV

 

Our old friend Twilio (TWLO) is expected to announce earnings this coming Tuesday after the close. For that reason, I thought I’d discuss its current price/volume action as it heads into earnings. As I’m sure many of you will recall, TWLO is perhaps most notable for demonstrating how a very hot IPO, seemingly destined for “Greatest Stock Market Winners of All Time” fame, can flame out in the worst possible way.

Just when everyone is trying to come up with some deep precedence analysis comparing the stock to some astounding market winner of the distant past, the thing basically blows up. In total, TWLO’s declined spanned 63.4% of downside from its 70.96 peak in late September. On the way down the stock made a couple of attempts at turning up off the lows with bottom-fishing pocket pivot (BFPP) moves in November and December, both of which failed.

On Friday, TWLO posted another pocket pivot along the lows, but this one was quantitatively different from the prior attempts in November and December. The first and major difference is that in pulling this latest BFPP it finally cleared its 50-day moving average. The second is that this is coming at the tail end of a relatively large cluster of five-day and ten-day pocket pivots, highlighted in blue at the bottom of the chart.

The Rule of Three might imply that this latest BFPP has the potential to work where the others did not. If TWLO were not expected to announce earnings so soon on Tuesday, this would be a simple trade. One goes long here and uses the 50-day line at 30.15 as a relatively tight selling guide.

 

GR020517-TWLO

 

The weekly chart also reveals that TWLO has had three waves of selling in its pattern, and each wave has been of a shorter duration than the prior wave. This might also argue for at least some sort of intermediate, tradeable bottom and turn in the stock. But with earnings coming up one might prefer to simply wait and see what transpires after the report.

Currently TWLO has about 9 million shares of short interest relative to a float of 34 million shares. This is probably enough to spark a short-covering rally, but the stock does trade a hefty 4.2 million shares a day on average. If I saw a gap-up move following earnings, I might be inclined to treat it as a bottom-fishing buyable gap-up.

Otherwise, the more daring among you might think about testing a small position ahead of earnings, in the spirit of playing earnings roulette, although that is not something I advise. The question is whether this current action is a clue that something positive will happen after earnings. Food for thought as a formerly hot IPO name tries to find a final low after the most brutal of price declines.

 

GR020517-TWLO Weekly

 

Notes on other long situations discussed in recent reports:

Alibaba (BABA) closed Friday at 100.39, just 45 cents above the 99.94 intraday low of its January 24th buyable gap-up move. This puts the stock in a lower-risk entry position, using the 99.94 low as a tight selling guide.

Clovis Oncology (CLVS) is still extended. It pulled down to its 10-day moving average on Friday and held, closing near the peak of its intraday price range. As I discussed on Wednesday, it has shown a tendency to obey the 10-day line, so for now I would use that as your trailing stop as its expected earnings report date of February 23rd approaches.

Incyte Pharmaceuticals (INCY) is sitting at its 10-day moving average with volume drying up on Friday. I’m not inclined to do anything here ahead of earnings, which are expected to be reported on February 14th.

JD.com (JD) is still to be bought on pullbacks to the 20-day line, now at 27.71.

Glaukos (GKOS) has continued to power higher after Tuesday’s big-volume pocket pivot. The stock is now well-extended from its pocket pivot of January 6th (about 20% higher) such that one could take profits ahead of earnings, which are expected on March 1st.

GrubHub (GRUB) dipped below its 10-day moving average on Friday on heavy selling volume. Earnings are expected to be announced this coming Wednesday, so there is nothing to do with the stock until then. Short interest in the stock has been cut in half, from just over 10 days of average daily volume to just over 5, as of the January 15th report date.

Mobileye (MBLY) is chopping and slopping around its 10-day and 20-day moving averages as it consolidates the strong move it had in late December into late January. I like the stock on low-volume pullbacks to the 20-day line at 42.13, but keep in mind that earnings are coming up and are expected to be announced on February 22nd.

Momo (MOMO) remains buyable on pullbacks to its 20-day moving average at 22.23.

Netease (NTES) is still tracking along its 10-day moving average. Earnings are expected on February 15th, so it’s not clear that I would want to do anything with the stock here ahead of earnings.

Nvidia (NVDA) has continued to move toward its prior December highs near 120, and closed Friday at 114.38 after getting as high as 115.90. Earnings are expected on February 15th, but the stock has given traders a nice move since it posted an undercut & rally buy signal on January 18th at 102.95.

ServiceNow (NOW) continues to build what is now a six-day flag formation following the prior week’s buyable gap-up move. The stock closed Friday at 89.47, six cents above the 89.41 intraday low of the January 26th BGU. I like it best on pullbacks to the rapidly rising 10-day moving average, now at 88.19.

Square (SQ) pulled into its 50-day moving average on Friday as volume picked up on the day but remained below average. This pullback puts the stock in a lower-risk entry position using the 50-day line at 14.05 as your selling guide. Earnings aren’t expected until the first week of March.

Weibo (WB) posted a pocket pivot at its 10-day moving average on Thursday, and then pulled into the 10-day line on Friday as volume dried up to -58.8% below average. So while one would certainly not have wanted to chase the strength on Thursday, this low-volume, voodoo pullback to the 10-day line puts the stock in a better, lower-risk entry position following the previous day’s pocket pivot move.

Oil names that I’ve been discussing in recent reports, Diamondback Energy (FANG), Parsley Energy (PE), and Rowan Companies (RDC) will all be announcing earnings in the third week of February, but PE and RDC have looked like short-sale targets as of late. PE, not shown, is sitting well below its 50-day moving average after breaking below the line on Monday. I discussed the stock’s action in my Wednesday mid-week report. Rallies back up into the 50-day line at 36.06 would present lower-risk short-sale opportunities.

Meanwhile, RDC has rallied right back up into its 50-day moving average at 18.96 where it stalled a bit on heavy volume Friday.  This becomes an easy trade, shorting the stock here and using the 50-day line as a tight upside stop. Whether it will produce amazing downside profit potential remains another question, particularly with earnings looming ahead in a couple of weeks.

 

GR020517-RDC

 

As I run through my screens I see a number of stocks that look constructive on the long side and a number of stocks that look like potential short-sale targets. This is a tough market, and it is difficult to make significant progress in individual stocks one way or the other.

In particular, it’s not like the long side has been a gold mine of profits even as the indexes look very strong and the Dow has regained the 20,000 price level while the NASDAQ Composite posts all-time highs. Most of the best moves in stocks have occurred on gap-ups following earnings. Meanwhile, the steadiest upside performers among stocks I’ve discussed in reports since the New Year began have been the bio-techs CLVS, GKOS, and INCY.

For the most part, this past week’s action appears to have been driven by news regarding immigration, oil production/prices, the Fed, the rolling back of Dodd-Frank, on-again off-again infrastructure talk, the timing of tax cut legislation, and of course the monthly jobs number. This created a fair bit of volatility, but through it all the indexes more or less ended the week where they began. Some stocks, like AMZN, for example, were not as lucky.

The main problem to be solved currently is finding precisely where, and even whether, big money can be made with individual stocks. The set-ups themselves have been a mixed bag, with some names working well while others have fits of strong action but no follow-through.

So what happens in an environment like this is that investors risk getting whip-sawed around and subjected to death by a thousand cuts. The only way to guard against this is to take the opportunistic approach of only taking positions at points where risk can be kept to a minimum. If you have to take some cuts, it is always best that they be as small as possible. Taking a lot of 7-8% losses is a sure path to one’s investing demise.

I can still hear Bill O’Neil tell me back in the middle of 1999, just before the big run in the final two months of the year, when we were getting whip-sawed back and forth, “You lose a million here and a million there, and pretty soon you’re talking about real money!” I suppose for most investors a “million here or there” would be real money, but you get the idea.

I still remain cautious about this market, but in practical terms that just means keeping my entries and stops tight. At the same time, I will employ a bifurcated approach where I am willing to assess individual stock set-ups, long or short, based on their particular merits as they present themselves in real-time.

There are some stocks acting constructively on the long side, while others are breaking down and have provided reasonable short-sale targets. So the market is facilitating a bifurcated approach, the only question is whether any of this can result in making big money, at least in the near-term.

Therefore, the main objective is to stay in the game while either making some progress or at least holding the flat line and avoiding serious trouble. Eventually a strong trend will develop one way or the other. In service of this we simply go with the individual stock set-ups as they occur, long or short, as this will ultimately lead us in the right direction at the right time, when a strong, broad trend does develop.

Gil Morales

CEO and Principal, Gil Morales & Company, LLC
Managing Director and Principal, MoKa Investors, LLC
Managing Director and Principal, Virtue of Selfish Investing, LLC

At the time of this writing, of the stocks mentioned in this report, Gil Morales, MoKa Investors, LLC, Virtue of Selfish Investing, LLC, and/or Gil Morales & Company, LLC held positions in AAPL, NFLX, and X, though positions are subject to change at any time and without notice.

Gil Morales & Company, LLC (“GMC”), 8033 Sunset Boulevard, Suite 830, Los Angeles, California, 90046. GMC is a Registered Investment Adviser. This information is issued solely for informational purposes and does not constitute an offer to sell or a solicitation of an offer to buy securities. Information contained herein is based on sources which we believe to be reliable but is not guaranteed by us as being accurate and does not purport to be a complete statement or summary of available data. Past performance is not a guarantee, nor is it necessarily indicative, of future results. Opinions expressed herein are statements of our judgment as of the publication date and are subject to change without notice. Entities including but not limited to GMC, its members, officers, directors, employees, customers, agents, and affiliates may have a position, long or short, in the securities referred to herein, and/or other related securities, and may increase or decrease such position or take a contra position. Additional information is available upon written request. This publication is for clients of Gil Morales & Company, LLC. Reproduction without written permission is strictly prohibited and will be prosecuted to the full extent of the law. ©2008-2017 Gil Morales & Company, LLC. All rights reserved.