By Kevin Marder
For those who are incredulous about this 12-week advance, it is to be remembered that the biggest driver of equity prices is interest rates. This is the way it has always been, and this is the way it will always be.
And rates have been quiescent for quite some time. This explains the length of this bull market (it also explained the length of the Bubble Era of the ‘90s, along with technological innovation). Those who choose to argue with either this truism or the other major truism in investing, which is to not fight market momentum, invariably find themselves out of synch with share prices.
Last week's column noted that " At a minimum, the Nasdaq Composite is expected to need some weeks in order to re-set itself for its next leg up ." Since then, the market has recovered more quickly than anticipated.
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Whether or not it does need some weeks to recover, this should not keep speculators on the sideline. In situations like this, there may be dozens of speculative issues moving out of basing patterns. One does not want to ignore what's happening sub-surface simply because the averages might be going through a corrective phase.
In fact, broad sector leadership often changes during a correction in the averages. This is when speculators want to be diligently keeping tabs on the action.
As it so happens, there are currently a number of situations that act well and are breaking out of bases. Regardless of what transpires with the central bank's policy meeting announcement Wednesday, one should be stalking these titles.
Among the names, Abiomed /zigman2/quotes/202106417/composite ABMD +0.60% was discussed in the July 5 column. (" Very aggressive speculators might consider the Aug. 13 high of 110.68 as an entrance pivot for a breakout play. ") The company makes products to address heart disease and advanced heart failure.
One of the attractions here is the earnings-estimate acceleration expected by most Wall Street analysts tracking the outfit. March 2017 fiscal year earnings growth is forecast by most to be 38%, followed by a 54% estimated increase in the March 2018 year. This magnitude of forecasted growth is uncommon in the current market.
The other four substantial pluses are 11 months' worth of solidly rising relative-strength line, extreme accumulation (focused buying) over the medium term, rock-steady revenue growth (38%, 39% and 40%, respectively, in recent quarters), and, technically, a sound base.
Regarding the latter, price forms a six-week flat consolidation characterized by a major volume dry up. Friday, the stock came out of the base on volume 45% above average. This is generally the minimum amount of volume that is preferred on a breakout.
An aggressive speculator may consider entrance around Tuesday's closing level of 125.10. This is less than 0.5% past the pivot point of 124.72, the Aug. 11 high. Pullback players may wait to see if price can retrace to the 120.00 area.
As always, a protective stop should be used to mitigate risk, along with a starter position that is half normal size, or less. This initial position could be added to if the stock proves itself.