While the market continues to behave just fine, the worry warts
are still a vocal bunch, content to talk about reasons why the
stock market will face turbulence ahead. True, there are many
issues still unresolved on Capitol Hill when it comes to the
deficit and spending cuts, but one things for certain: Market
sentiment's gotten a whole lot better in recent days.
There's no need to chase here, but there's nothing wrong with
nibbling at some stocks still within buying range. It's called
swimming with the market tide.
Last week's bullish gap up by the Nasdaq Composite in higher
volume -- and equally bullish move by the S&P 500 -- was an
unequivocal sign of institutional buying and brings a re-test of
the September highs into play. The Nasdaq's weekly gain of 4.8
percent was its largest in more than a year. Bulls waiting for new
institutional money to come in from the sidelines saw it happen
last week. Any market uptrend needs institutional buying to sustain
it. There may one last shakeout before a breakout, but the pieces
seem to be in place for more strength.
Be careful about chasing stocks that have quickly become
extended in price. Stocks in this boat include new market darlings
3-D Systems (NYSE:
) and Stratasys (Nasdaq:
) as well as names like Qihu 360 Technology (Nasdaq:
), Fleetcor Technologies (NYSE:
) and Yahoo (Nasdaq:
). Instead, focus on stocks that are basing or still within buying
range after recent breakouts. They could have more left.
One name that comes to mind is Varian Medical Systems (NYSE:
). The company makes oncology systems and equipment used in
radiation therapy. It has a market capitalization of nearly $8
billion and trades close to 1 million shares a day. The company has
a consistent track record of earnings growth and annual return on
equity is exceptional at 31 percent. Fundamentals are solid,
although sales growth has been decelerating in recent quarters.
Some slack should be cut, however, because sales growth is
expected to re-accelerate when the company reports fiscal
first-quarter results after the close on January 23. The consensus
estimate calls for profit of $0.79 a share, up 10 percent from a
year ago with sales up 8 percent to $676 million.
Technically, Varian looks good. After two down weeks in light
volume where it didn't give up much ground, shares popped 4.5
percent last week in higher volume. Varian remains under
accumulation as the stock vies for a bona fide breakout from a long
base. Recent strength in the market has resulted in a lot of
extended stocks, but Varian Medical isn't one of them. Near-term
support levels for the stock are $72 and $69. Shares closed Friday
Note: Join me for a Webinar this week at Benzinga.com. A 2013
Market Outlook Roundtable: Thursday, January 10 from 7-8 p.m. ET.
Sign up here: bit.ly/TIo07p
Stock chart: (c) 2013 Benzinga.com. Benzinga does not provide
investment advice. All rights reserved.
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