Q2 STOCK GUIDE The Blue Dot List - Investor's Business Daily

Q2 STOCK GUIDE

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The Blue Dot List:Our newest feature for finding top stocks

Stock Guide // 2019 Q2

At MarketSmith, our team is always looking for ways to improve our

product and help our members invest better. Our newest featured stock list

is quickly becoming a favorite among both long-time members and our in-

house team: RS Line Blue Dot, better known around here as “The Blue Dot

List.” Check out this issue’s feature article for a full rundown of what Blue

Dot stocks are and why you should be checking this new list frequently.

For our featured interview this month, we talked to Joe Fahmy, a profession-

al Investment Advisory Representative with nearly two decades of trading

experience. Joe has been using MarketSmith for years to find and evaluate

new stock trades through a fundamental and technical lens. He shares some

of his experiences in the market, as well as his predictions for Q2.

Finally, we’re excited to introduce a new regular feature to our Stock Guide

readers. In Good Trade/Bad Trade, we’ll talk to one of our in-house experts

about two of their recent trades—one winner and one loser—and see what

they did right and wrong. This month’s subject is MarketSmith Product

Coach Andrew Rocco, who dives into some revealing technical analysis of

Baozun (BZUN) and talks about his mistakes buying into the volatile

Tesla (TSLA).

As always, if you have any questions or comments about your investing

research or any MarketSmith features, please call one of our product

coaches at (800) 831-2525 or email us at [email protected].

We’re here to help you make more money in the market.

Best Returns,

The MarketSmith Team

2

MarketSmith.com // 2019 Q2

S & P 500 INDEXCLOSE 2834.4

2717.49

2791.47

2916.502940.91

2815.152800.18

2553.80

2594.62

2691.99

2603.54

2346.58

2722.27

50 DAY MOVING AVERAGE


2250

2350

2450

2550

2650

2750

2850

2950

3050

DAILY VOLUME AND 50-DAY AVERAGE DAILY VOLUME LINE

500 M

850 M

1.4 B

2.5 B

2915115118421723926122814311732062282511271330

MARFEBJAN 2019DECNOVOCTSEPAUGJULJUNMAYAPR

NASDAQ COMPOSITECLOSE 7729.32

7319.58

7806.60

7933.31

8133.30 8107.38

7486.51

6805.96

7419.56

7604.24

6922.836830.76

6190.16

7332.92



5900

6100

6300

6500

6700

6900

7100

7300

7500

7700

7900

8100

8300

DAILY VOLUME AND 50-DAY AVERAGE DAILY VOLUME LINE

850 M

1.6 B

2.5 B

4 B

2915115118421723926122814311732062282511271330

MARFEBJAN 2019DECNOVOCTSEPAUGJULJUNMAYAPR

S & P 500 Index

NASDAQ Composite

3

*All screen results are computer-generated and were run on March 29, 2019.

Market Charts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

The MarketSmith Blue Dot . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Blue Dot Special* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Tegna Inc (TGNA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Sinclair Broadcast Group (SBGI) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Alexion Pharmaceuticals (ALXN) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Gray Television Inc (GTN) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

S S & C Technologies (SSNC). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Palo Alto Networks (PANW) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

A Conversation with Joe Fahmy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Earnings & Margins* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Arista Networks Inc (ANET) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Camtek Ltd (CAMT) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Cabot Microelectronics (CCMP) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Fortinet Inc (FTNT) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Good Trade/Bad Trade: Andrew Rocco . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Feature Highlight: Stock Ideas Button . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Connect with Us . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Table of Contents

4

MarketSmith.com // 2019 Q2 l Feature Article

MarketSmith’s newest stock list is already one of its most popular among

subscribers. It’s called RS Line Blue Dot, and if you’re not checking it for

new stock ideas, you could be missing out.

Here’s How It Works

Stocks make the RS Line Blue

Dot list when they satisfy two

criteria: first, they’ve hit a

52-week high in their Relative

Strength line. This is where

you’ll notice a translucent blue

dot appear on the Relative

Strength line of the stock’s

chart. Second, the stock is

currently building a base. If both of these conditions occur, the stock goes

on the list for 90 days. You can access the list by clicking on the “Open

Stock Ideas” button in the top-right corner on any MarketSmith chart.

What does that mean? Two things.

The first thing stocks on the Blue Dot list have shown is that they are

outperforming the market (specifically, the S&P 500) in the strongest way

possible. This is important because the highest-potential stocks will show

strength by outperforming the market in any market conditions.

If the market’s down, good stocks will outperform by treading water and

setting up for a spike when the market character changes to an uptrend. In

good market conditions, the best stocks will offer the biggest gains relative

to other high-performance names. Ultimately, it’s all about maximizing

opportunity; since you can only buy a finite amount of stocks, it makes

sense to prioritize the best ones.

Feature Article:

The MarketSmith Blue Dot

5


The second important characteristic of Blue Dot stocks is that they’re

building a base, which means you’re not chasing an extended stock that

has less potential for short-term growth. After all, even the best stocks

take time to retrench after sizeable runs. A stock that’s currently in a

base will have a clear buy point in MarketSmith thanks to the Pattern

Recognition feature.

Blue Dot Case Study: KEYS

Let’s look at a recent Blue Dot stock. Keysight (KEYS) is a company that

stands to benefit from the forthcoming adoption of the 5G standard

in wireless data. To bring 5G networks and smart devices to market,

wireless service providers and electronics makers use Keysight’s

technologies to test and optimize their designs.

The company itself was showing very bullish fundamentals in late 2018:

accelerating earnings, steady sales and a strong ROE. KEYS started

forming a cup-shaped base in August 2018; as it began to form the right

side of the base, its Relative Strength line hit a new high eight times

during December 2018 and January 2019! Keep in mind, KEYS was

outperforming the S&P during the December market correction that

dragged down stocks across the board—a classic sign that a stock is one

to watch when a new uptrend starts.

To recap, as KEYS neared its buy point in January 2019, it had very

strong fundamentals and eight recent Blue Dot appearances in

MarketSmith—a rare combination of superior technical and fundamental

strength aligning at the right time.

On January 24, 2019, KEYS broke out in volume 91% above average and

rose 4.5% from the day prior. It closed up in price 19 out of the next 21

trading days before entering a +20% profit target zone. Stocks don’t get

much easier to hold than that.

6

Find the strongest Blue Dot stocks

This screen builds on the Blue Dot list criteria to screen for stocks in a strong industry group with 90th-percentile fundamentals, strong liquidity and positive demand.

Blue Dot Special

COMPANY (SYMBOL) INDUSTRY GROUP RS RATING PAGE

Tegna Inc (TGNA) Media-Radio/Tv 99 7

Sinclair Broadcast Group (SBGI) Media-Radio/Tv 99 7

Alexion Pharmaceuticals (ALXN) Medical-Biomed/Biotech 99 8

Gray Television Inc (GTN) Media-Radio/Tv 99 8

S S & C Technologies (SSNC) Computer Sftwr-Financial 99 9

Palo Alto Networks (PANW) Computer Sftwr-Security 99 9

Visit MarketSmith.com/learn/stockguide to load the criteria for this and

other Stock Guide screens directly into your MarketSmith screener.

*All screen results are computer-generated and were run on March 29, 2019. This screen can also be found on

marketsmith.com in shared screens.

Screen created by Arnie Gutierrez, MarketSmith Product Coach

7

MarketSmith.com // 2019 Q2Tegna Inc (TGNA)

Sinclair Broadcast Group (SBGI)

TEGNA INC(TGNA) NYSE 216.1 SHRS / 213.9 FLT / AVG VOL2.32MIL $14.10(OH -9%)MEDIA-RADIO/TV tegna.comOPERATES 49 TELEVISION STATIONS AND AFFILIATED ONLINE SITES COVERING ONE THIRD OF THE U.S. POPULATION.

3/19 EXPECTS Q1 2019 REVENUES GROWTH OF LOW-SINGLE DIGITS.

SHORT INT 5.7 DAYS -22%OPTIONS ON AM/MSUP/DOWN 1.5EX-DIV 3/7YIELD 2.0%

GROWTH RATE -3%EARNINGS STAB 17EPS RANK 80PE 8 (0.4XS&P)5 YR PE 6 - 17

DEBT 220%NEW CEO 6/17TIMELINESS AACC/DIST BSMR RATING A

2.28 X BK VALUEINVENTORY TO.R&D N/ARET ON EQUITY 34%CASH FLOW $2.24

FUNDS 52%BANKS 1%MGMT 1%ALPHA 0.08BETA 0.98

11.10

12.4912.16

13.59

15.5815.58

10.46

10.00 10.1110.53 10.37

10.80

10.24

11.25

92

QTR 1QTR 4

QTR 3

QTR 2

8

10

12

14

16

PRICE SCALE

99COMPOSITE RATING13$ 2.02 $ 14 814 1.22 17 1215 1.44 20 1316 1.69 16 1117 1.08 16 1118 1.83 15 1019 1.31EST -28% ↓20 2.12EST +62% ↓

EARNINGS (DEC) HI LOGrayTelA GTNA 97 99GrayTelevi GTN 96 99NexstarMed NXST 96 99ScrippsEWA SSP 96 77Sinclair SBGI 94 94

GROUP REL STR 87 RS EPS

29151151184217239261228143117320622825112713MARFEBJAN 19DECNOVOCTSEPAUGJULJUNMAY

EARNINGS $SALES MIL. $DIVIDEND-PE

0.33 VS 0.25 +32%502.1 VS 459.1 +9%$0.07 12X-- 10X

0.36 VS 0.29 +24%524.1 VS 489.4 +7%$0.07 10X-- 9X

0.40 VS 0.23 +74%539.0 VS 464.3 +16%$0.07 11X-- 8X

0.74 VS 0.32 +131%642.1 VS 490.3 +31%$0.07 10X-- 7X

EPS DUE 5/8 QUARTER ENDED MAR 31,18 QUARTER ENDED JUN 30,18 QUARTER ENDED SEP 30,18 QUARTER ENDED DEC 31,18

R S LINE VS SP500 VOLUME

1.1M

3M

8M

*SINCLAIR BROADCAST GROUP(SBGI) NASDAQ 65.7 SHRS / 46.7 FLT / AVG VOL1.09MIL $38.48(OH -3%)MEDIA-RADIO/TV sbgi.netTV BROADCASTER THAT OWNS OR PROVIDES PROGRAMMING, OPERATING OR SALES SERVICES TO 191 STATIONS IN 89 MARKETS.

2/19 EXPECTS 2019 CAPITAL EXPENDITURES OF $250 MIL TO $260 MIL.

SHORT INT 3.6 DAYS -1%OPTIONS ON PHUP/DOWN 2.4EX-DIV 3/8YIELD 2.0%

GROWTH RATE +22%EARNINGS STAB 17EPS RANK 94PE 11 (0.6XS&P)5 YR PE 8 - 33

DEBT 235%NEW CEOTIMELINESS AACC/DIST ASMR RATING A



33.95

30.00

32.30 32.00

39.88

26.5027.05

25.13

26.8526.04

25.14

94

QTR 1QTR 4

QTR 3

QTR 2

DIVINC

20

25

30

35

40

PRICE SCALE

99COMPOSITE RATING(C)13$ 1.04∆ $ 36 1214 2.17∆ 37 2315 1.79∆ 35 2416 2.86∆ 34 2417 2.82∆ 43 2618 3.59∆ 40 2519 2.31EST -36% ↓20 4.56EST +97% ↑

EARNINGS (DEC) HI LOGrayTelA GTNA 97 99GrayTelevi GTN 96 99NexstarMed NXST 96 99ScrippsEWA SSP 96 77Tegna TGNA 92 80




0.42∆ VS 0.32∆ +31%665.4 VS 626.9 +6%$0.18 16X-- 11X

0.27∆ VS 0.43 -37%730.1 VS 652.2 +12%$0.18 12X-- 9X

0.86∆ VS 0.37∆ +132%766.3 VS 644.5 +19%$0.18 12X-- 9X

2.10∆ VS 1.67∆ +26%893.3 VS 712.5 +25%$0.20 11X-- 8X


R S LINE VS SP500

VOLUME

500K

1.2M

8

Alexion Pharmaceuticals (ALXN)

Gray Television Inc (GTN)

ALEXION PHARMACEUTICALS(ALXN) NASDAQ 223.5 SHRS / 212.3 FLT / AVG VOL1.59MIL $135.18(OH -3%)MEDICAL-BIOMED/BIOTECH alexion.comDEVELOPS THERAPEUTICS TO TREAT HEMATOLOGIC AND NEUROLOGIC DISEASES AND METABOLIC AND INFLAMMATORY DISORDERS.

2/19 EXPECTS 2019 NON-GAAP EARNINGS OF $9.10 TO $9.30 PER SHARE ON REVENUES OF $4.625 BIL TO $4.700 BIL.

SHORT INT 2.4 DAYS +6%OPTIONS ON AM/MSUP/DOWN 1.4EX-DIVYIELD


DEBT 31%NEW CEOTIMELINESS AACC/DIST BSMR RATING A

3.39 X BK VALUEINVENTORY TO. 8.9XR&D 17.7%RET ON EQUITY 20%CASH FLOW $8.43


123.48

138.77140.77

129.36

138.32138.32

102.10

114.40 115.40

109.74

92.56

91

QTR 1QTR 4

QTR 3

QTR 2

80

90

100

110

120

130

140

150

160

PRICE SCALE

99COMPOSITE RATING(W)13$ 3.08 $ 133 8114 5.21 203 12615 4.70 208 14216 4.62 193 10917 5.86 149 9618 7.92 140 9219 9.29EST +17% ↓20 10.49EST +13% ↓

EARNINGS (DEC) HI LOCorMedix CRMD 99 54Trevana TRVN 99 44Clementia CMTA 99 41Kalvista KALV 99 40Cel-Sci CVM 99 40




1.68 VS 1.38 +22%930.9 VS 869.6 +7%N/A 24X-- 18X

2.07 VS 1.56 +33%1045 VS 912.7 +14%N/A 21X-- 17X

2.02 VS 1.44 +40%1026 VS 859.1 +19%N/A 22X-- 17X

2.14 VS 1.48 +45%1128 VS 909.7 +24%N/A 21X-- 13X

EPS DUE*4/26 QUARTER ENDED MAR 31,18 QUARTER ENDED JUN 30,18 QUARTER ENDED SEP 30,18 QUARTER ENDED DEC 31,18


600K

1.6M

4M

*GRAY TELEVISION INC(GTN) NYSE 82.0 SHRS / 80.4 FLT / AVG VOL983080 $21.36(OH -8%)MEDIA-RADIO/TV gray.tvOWNS AND OPERATES TELEVISION STATIONS IN 91 TELEVISION MARKETS BROADCASTING 400 PROGRAMMING STREAMS.

2/19 EXPECTS Q1 2019 REVENUES OF $495.0 MIL TO $502.0 MIL.

SHORT INT 2.6 DAYS -62%OPTIONS ONUP/DOWN 1.6EX-DIVYIELD


DEBT 184%NEW CEOTIMELINESS AACC/DIST BSMR RATING A



17.00

20.24

16.93

23.4523.45

10.70 10.70

14.60

16.35 16.22

13.75

96

QTR 1QTR 4

QTR 3

QTR 2

5

10

15

20

PRICE SCALE

99COMPOSITE RATING(W)13$ 0.32∆ $ 15 214 0.82∆ 15 715 0.66∆ 18 916 1.12∆ 16 717 1.75∆ 17 918 2.44∆ 20 1019 1.39EST -43% ↓20 3.44EST+147% ↓

EARNINGS (DEC) HI LOGrayTelA GTNA 97 99NexstarMed NXST 96 99ScrippsEWA SSP 96 77Sinclair SBGI 94 94Tegna TGNA 92 80




0.22∆ VS 0.17∆ +29%226.3 VS 203.5 +11%N/A 10X-- 7X

0.46∆ VS 0.98∆ -53%250.3 VS 226.7 +10%N/A 9X-- 6X

0.70∆ VS 0.21∆ +233%279.3 VS 219.0 +28%N/A 14X-- 8X

1.06∆ VS 0.40∆ +165%328.2 VS 233.6 +40%N/A 15X-- 8X



300K

800K

2.5M

9

MarketSmith.com // 2019 Q2MarketSmith.com // 2019 Q2S S & C Technologies (SSNC)

Palo Alto Networks (PANW)

S S & C TECHNOLOGIES(SSNC) NASDAQ 240.5 SHRS / 197.2 FLT / AVG VOL1.78MIL $63.69(OH -1%)COMPUTER SFTWR-FINANCIAL ssctech.comPROVIDES SOFTWARE FOR THE FINANCIAL SERVICES INDUSTRY TO SUPPORT INVESTMENT MANAGEMENT AND OTHER FUNCTIONS.

3/19 TO OFFER $2.0 BIL OF 5.500% SENIOR NOTES DUE 2027.

SHORT INT 3.9 DAYS -4%OPTIONS ON PHUP/DOWN 2.0EX-DIV 2/28YIELD 0.6%



5.80 X BK VALUEINVENTORY TO.R&D 9.2%RET ON EQUITY 20%CASH FLOW $3.38


55.25

60.9759.52

52.54

50.00

64.3664.36

46.1047.51

51.0252.50 53.15

42.7340.96

54.03

93

QTR 1QTR 4

QTR 3

QTR 2

DIVINCPSO

SODIVINC

30

40

50

60

70

PRICE SCALE

99COMPOSITE RATING13$ 0.99 $ 22 1114 1.18 29 1715 1.33 38 2616 1.64 34 2317 1.93 42 2818 2.90 60 4019 3.73EST +29% ↑20 4.15EST +11% ↑

EARNINGS (DEC) HI LOFairIsaac FICO 95 83Q2 Holding QTWO 94 70Intuit INTU 93 91ACI Wwde ACIW 92 83EllieMae ELLI 90 65




0.53 VS 0.44 +20%421.9 VS 407.7 +3%$0.07 28X-- 22X

0.62 VS 0.46 +35%895.8 VS 411.0 +118%$0.07 28X-- 23X

0.79 VS 0.50 +58%992.4 VS 418.3 +137%$0.08 28X-- 24X

0.95 VS 0.54 +76%1111 VS 438.4 +153%$0.08 26X-- 17X



600K

1.7M

5M

*PALO ALTO NETWORKS(PANW) NYSE 93.7 SHRS / 90.0 FLT / AVG VOL1.45MIL $242.88(OH -6%)COMPUTER SFTWR-SECURITY paloaltonetworks.comPROVIDES NETWORK SECURITY INFRASTRUCTURE PRODUCTS FOR ENTERPRISES, SERVICE PROVIDERS AND GOVERNMENT ENTITIES.

3/19 ACQUIRED DEMISTO, A CYBERSECURITY COMPANY SPECIALIZING IN SECURITY ORCHESTRATION, FOR ABOUT $560 MIL IN CASH/STK.



DEBT 142%NEW CEO 6/18TIMELINESS AACC/DIST BSMR RATING A

23.30 X BK VALUEINVENTORY TO.R&D 17.6%RET ON EQUITY 45%CASH FLOW $5.33


197.20

217.40 219.38

239.50

192.80

260.63

195.78 193.61

160.08

168.80

89

QTR 1QTR 4

QTR 3

QTR 2

140

160

180

200

220

240

260

280

PRICE SCALE

99COMPOSITE RATING$42.00IPO 7/20/1213$ 0.24 $ 62 3914 0.40 128 5415 0.86 200 11716 1.89 177 11117 2.71 157 10718 4.07 239 14519 5.48EST +35% ↑20 6.43EST +17% ↑

EARNINGS (JUL) HI LOZscaler ZS 99 73CybArkSftw CYBR 98 99Rapid7 RPD 98 38Okta A OKTA 97 43Securework SCWX 96 73




0.99 VS 0.61 +62%567.1 VS 431.8 +31%N/A 59X-- 49X

1.28 VS 0.92 +39%658.1 VS 509.1 +29%N/A 64X-- 52X

1.17 VS 0.75 +56%656.0 VS 501.8 +31%N/A 63X-- 43X

1.51 VS 1.05 +44%711.2 VS 545.6 +30%N/A 48X-- 38X

EPS DUE 6/4 QUARTER ENDED APR 30,18 QUARTER ENDED JUL 31,18 QUARTER ENDED OCT 31,18 QUARTER ENDED JAN 31,19

R S LINE VS SP500

VOLUME

700K

1.4M

3M

10

MarketSmith.com // 2019 Q2 l Q&A: Joe Fahmy

Joe Fahmy is an

Investment Advisory

Representative at Zor

Capital, a New York-

based investment firm.

Joe has over 21 years of

trading experience during

which he developed his

investment strategy and

sharpened his skills. He’s also a long-time MarketSmith member who uses

the platform to find and evaluate trading ideas. His extensive knowledge

of technical analysis, market forecasting and risk management has landed

him appearances on Wall Street Week, Fox Business, CNBC, ABC News,

CNN Money and Yahoo Finance, where he is a regular contributor.

We recently spoke to Joe about stock analysis and the trends he sees

ahead for Q2.

Q: What was your first big winning trade, and what did you learn from it?

I did well in many stocks during the 1995-1999 bull market, but my first

big winning trade was Hansen’s Natural Corporation in 2004-2006. The

symbol used to be HANS but it is now Monster Beverage Corp (MNST). I

remember buying a position and immediately being up 20-25% in a few

weeks. I normally would sell a nice gain like that, but I remembered how

both Jesse Livermore and William O’Neil say that when you buy a stock at

the proper entry point and it shows you an immediate profit, be patient

and play for a bigger move.

I kept a core position and traded around it from around $20 all the way

up to around $135 (split adjusted). Less than a week after I sold it, it

had a “blow-off” move and went to $200, but I was more than happy

with the gain.

A Conversation with Joe Fahmy

11


The biggest lesson I learned from this was patience, especially when you

discover a stock with a strong fundamental story and explosive triple-digit

growth with expanding profit margins. These stories are difficult to find,

but when you discover them and have some patience, all you need is one

of them to make your year.

Q: Name a sector or industry you’re bullish on for Q2.

I’ve been pounding the table on Enterprise Software and Software

Security stocks for over a year now. Many of these stocks doubled in 2018

when all the major averages were negative for the year, and this group

showed amazing relative strength during the Q4 correction. When the

market had a follow-through day on January 4th, 2019, I immediately

started putting money to work in the strongest stocks I could find, and

most of them came from this sector.

Q: What are a few trends you see coming in Q2?

I always say that the stock market moves on two main factors: earnings

and interest rates. The rest is just noise in my view. For the rest of the year,

interest rates are expected to remain low and this is bullish for stocks.

I’m never one to complain about what the Fed is doing. I prefer to take

advantage of this equity-friendly environment instead.

While earnings are slowing from the strong pace of the last two years,

they are still growing slowly and steadily. I think these two factors will

keep us moving higher into the end of the year (with corrections and

pullbacks along the way, of course).

Q: Any favorite MarketSmith screens or lists you pay special attention to?

The three main MarketSmith screens I use involve earnings growth, profit

margin expansion, and MarketSmith’s proprietary Relative Strength

Rating. My process involves screening the market nightly and going

through about 500-1,000 stocks. This gives you a really good feel for the

market’s health and guides you toward the strongest sectors. In other

12

words, while going through your screens, a light bulb should go on

when you notice many strong stocks from the same sectors appear

over and over.

Q: What’s your market-wide “warning light” for reducing your

overall exposure?

I like to use the 10-week moving average on the major indexes. Most

people use the S&P 500, but I prefer to look at the Nasdaq Composite

and the Russell 2000. I like these averages better because they are

where most of the growth stocks come from and it tells me if the big

institutions are putting money to work in riskier assets or not. If they

are, it is usually a sign the market is healthy.

When the indexes break below the 10-week moving average, it is usually

a warning sign to raise cash and get more defensive. There are other

factors, of course, but this is a simple one investors can use.

Q: What’s the best advice you would give investors?

To paraphrase William O’Neil, most investors buy “nothing to write

home about” stocks. There are thousands of stocks in the market, so why

not buy the best you can find when the market is in a strong uptrend?

By the best, I mean companies with 30% or higher earnings and sales

growth.

I would also stress the importance of mental toughness and protecting

your confidence. An investor’s goal should be to produce consistently

strong returns over a long period of time. This is very tough to do unless

you have a strong mental state and confidence in what you are doing.

There are thousands of stocks in the market, so why not buy the best you can find when the market is in a strong uptrend?

MarketSmith.com // 2019 Q2 l Q&A: Joe Fahmy

13

Quality stocks that outperform their peers

This screen looks for stocks with classically strong fundamentals, especially in the area of earnings (quarterly and 3-year). Along with strong proprietary ratings like EPS and RS, this screen selects for margins better than a company’s industry group peers.

Earnings & Margins

COMPANY (SYMBOL) INDUSTRY GROUP RS RATING PAGE

Arista Networks Inc (ANET) Computer-Networking 99 14

Camtek Ltd (CAMT) Elec-Scientific/Msrng 99 14

Cabot Microelectronics (CCMP) Elec-Semiconductor Equip 99 15

Fortinet Inc (FTNT) Computer Sftwr-Security 99 15

Visit MarketSmith.com/learn/stockguide to load the criteria for this and

other Stock Guide screens directly into your MarketSmith screener.

*All screen results are computer-generated and were run on March 29, 2019. This screen can also be found on

marketsmith.com in shared screens.

Screen created by Scott St. Clair, MarketSmith Product Coach

14

Arista Networks Inc (ANET)

Camtek Ltd (CAMT)

*ARISTA NETWORKS INC(ANET) NYSE 75.7 SHRS / 50.7 FLT / AVG VOL912920 $314.46(OH 0%)COMPUTER-NETWORKING arista.comPROVIDES CLOUD NETWORKING SOFTWARE, HARDWARE FOR INTERNET, CLOUD AND NEXT-GEN DATA CENTERS.

2/19 EXPECTS Q1 2019 REVENUES OF $588 MIL TO $598 MIL.






272.54

287.12281.20

313.37

269.49

248.98

233.16235.24

252.25 253.51

213.11 210.55

187.08

204.94 94

QTR 1QTR 4

QTR 3

QTR 2

140

160

180

200

220

240

260

280

300

320

340

360

PRICE SCALE

99COMPOSITE RATING$43.00IPO 6/06/1413$ 0.82 $14 1.54 94 5515 2.44 88 5616 3.30 98 5217 5.61 245 8718 7.96 313 18719 9.25EST +16% ↑20 10.78EST +17% ↓

EARNINGS (DEC) HI LOCisco CSCO 90 77Aerohive N HIVE 90 73Digi DGII 81 77ExtremeNtk EXTR 80 54Radware RDWR 78 67




1.66 VS 0.93 +78%472.5 VS 335.5 +41%N/A 62X-- 42X

1.93 VS 1.34 +44%519.9 VS 405.2 +28%N/A 49X-- 37X

2.11 VS 1.62 +30%563.3 VS 437.6 +29%N/A 45X-- 37X

2.25 VS 1.71 +32%595.7 VS 467.9 +27%N/A 39X-- 25X


R S LINE VS SP500

VOLUME

350K

1M

2.8M

*CAMTEK LTD(CAMT) NASDAQ 36.4 SHRS / 18.9 FLT / AVG VOL178700 $8.92(OH -19%)ELEC-SCIENTIFIC/MSRNG camtek.comISRAELI MAKER OF AUTOMATED OPTICAL INSPECTION SYSTEMS FOR THE PRINTED CIRCUIT BOARD/SEMICONDUCTOR INDUSTRIES.

2/19 EXPECTS Q1 2019 REVENUES OF $33.5 MIL TO $34.5 MIL.

SHORT INT .2 DAYS+214%OPTIONS ONUP/DOWN 2.2EX-DIVYIELD


DEBT 0%NEW CEOTIMELINESS CACC/DIST ASMR RATING B



8.60 8.74

11.11

9.198.83 8.90

9.349.63

7.20

7.95

6.83

7.31

6.29

92

QTR 1QTR 4

QTR 3

QTR 2

DIVSPEC

4

6

8

10

12

PRICE SCALE

99COMPOSITE RATING13$ 0.07 $ 6 114 0.15 5 215 0.16 3 216 0.06 3 117 0.21 7 318 0.57 11 519 0.71EST +25% ↑20 0.84EST +18% ↓

EARNINGS (DEC) HI LOKeysight T KEYS 96 82Novanta NOVT 95 95MettlerTol MTD 92 84Bruker BRKR 92 81AgilentTec A 90 71




0.12 VS -0.02#+700%27.3 VS 21.2 +29%N/A 51X-- 27X

0.13 VS 0.06 +117%30.5 VS 22.7 +34%$0.14 34X-- 19X

0.16 VS 0.08 +100%32.3 VS 23.8 +35%N/A 26X-- 18X

0.17 VS 0.10 +70%33.2 VS 25.8 +28%N/A 21X-- 12X


R S LINE VS SP500

VOLUME

22K

70K

250K

15

MarketSmith.com // 2019 Q2Cabot Microelectronics (CCMP)

Fortinet Inc (FTNT)

*CABOT MICROELECTRONICS(CCMP) NASDAQ 28.9 SHRS / 28.1 FLT / AVG VOL298418 $111.96(OH -9%)ELEC-SEMICONDUCTOR EQUIP cabotcmp.comMANUFACTURES CHEMICAL MECHANICAL PLANARIZATION SLURRIES FOR POLISHING CONDUCTING/INSULATING MATERIALS

2/19 EXPECTS Q2 FY19 REVENUES TO BE DOWN LOW SINGLE DIGITS.

SHORT INT 2.7 DAYS -20%OPTIONS ON MS/NYUP/DOWN 1.2EX-DIV 3/20YIELD 1.5%




FUNDS 57%BANKS 1%MGMT 2%ALPHA N/ABETA 1.47

113.47

119.32

123.76

104.95

111.30

115.61

97.42

104.03 103.46

89.19

82.24 80

QTR 1QTR 4

QTR 3

QTR 2

DIVINC

70

80

90

100

110

120

130

140

PRICE SCALE

99COMPOSITE RATING(W)13$ 2.10 $ 45 3114 2.10 49 3815 2.26 53 3716 2.68 64 3417 3.56 102 6218 5.22 123 8219 7.07EST +35% ↑20 8.30EST +17% ↑

EARNINGS (SEP) HI LOAcmResrch ACMR 95 34KLA KLAC 90 92Ichor Hldn ICHR 88 59Entegris ENTG 87 85Formfactor FORM 86 79




1.19 VS 0.76 +57%143.0 VS 119.2 +20%$0.40 30X-- 24X

1.37 VS 0.81 +69%150.4 VS 128.0 +18%$0.40 30X-- 23X

1.48 VS 1.07 +38%156.7 VS 136.8 +15%N/A 28X-- 21X

1.90 VS 1.19 +60%221.8 VS 140.0 +58%$0.80 22X-- 16X

EPS DUE*4/26 QUARTER ENDED MAR 31,18 QUARTER ENDED JUN 30,18 QUARTER ENDED SEP 30,18 QUARTER ENDED DEC 31,18

R S LINE VS SP500

VOLUME

66K

138K

300K

*FORTINET INC(FTNT) NASDAQ 170.6 SHRS / 139.9 FLT / AVG VOL1.82MIL $83.97(OH -11%)COMPUTER SFTWR-SECURITY fortinet.comDEVELOPS UNIFIED THREAT MANAGEMENT SYSTEMS TO PROVIDE SECURITY AND NETWORKING FUNCTIONS

2/19 EXPECTS 2019 ADJUSTED EARNINGS OF $2.05 TO $2.10 PER DILUTED SHARE ON REVENUES OF $2.06 BIL TO $2.10 BIL.

SHORT INT 4.5 DAYS +7%OPTIONS ON AM/MSUP/DOWN 1.2EX-DIVYIELD


DEBT 0%NEW CEOTIMELINESS AACC/DIST CSMR RATING A



57.98

66.32

94.37

84.00

77.18

88.60

53.40

62.2764.65 64.41

79.68

91

QTR 1QTR 4

QTR 3

QTR 2

40

50

60

70

80

90

100

110

PRICE SCALE

99COMPOSITE RATING(W)$6.25IPO 11/18/0913$ 0.49 $ 25 1614 0.48 31 1815 0.51 50 2816 0.73 37 2317 1.04 45 2918 1.84 94 4319 2.08EST +13% ↑20 2.36EST +13% ↑

EARNINGS (DEC) HI LOZscaler ZS 99 73CybArkSftw CYBR 98 99Rapid7 RPD 98 38Okta A OKTA 97 43Securework SCWX 96 73




0.33 VS 0.17 +94%399.0 VS 340.6 +17%N/A 53X-- 43X

0.41 VS 0.27 +52%441.3 VS 363.5 +21%N/A 56X-- 45X

0.49 VS 0.28 +75%453.9 VS 374.2 +21%N/A 69X-- 47X

0.59 VS 0.32 +84%507.0 VS 416.7 +22%N/A 70X-- 42X



800K

2.5M

8M

16


In this edition of Good Trade / Bad Trade,

Andrew Rocco shared a couple of his

trades from last year—one winner and

one loser—and told us what he learned

from each.

TIP: pull up daily charts for BZUN and TSLA in MarketSmith and see how you would have handled these trades!

GOOD TRADE: BAOZUN (BZUN)

The Timeframe: May 2018 – June 2018

Stock Background: This trade came at a time when Chinese stocks were

very strong performers, so I felt like this stock might have good tailwinds.

Add to that the fact that it’s an enterprise software stock, one of the best-

performing industry groups from 2018, and I was intrigued. I really liked

BZUN’s consistently strong earnings and sales growth.

I’ve heard Baozun described as “the Shopify of China,” meaning the

company’s products and services are innovative and serve a huge need in

a market with enormous potential. E-commerce is exploding in China, and

this service helps optimize e-commerce websites, so it’s a great second-

order recipient of a larger trend.

Technical Picture: When I was watching Baozun in May 2018, it was in the

middle of a consolidation-type base after a big gap up on its Q4 earnings

report. The next earnings report was coming up on May 17; just before

that, there was a little shakeout and most of the weak hands were cleared

out. I was ready to pounce if the stock gapped up on earnings.

Good Trade/Bad Trade

The Trader: Andrew Rocco, MarketSmith Product Coach

17


My Buy Point: May 17, 2018 at 48. The stock gapped up on a really

strong earnings report and broke out of the consolidation during the day.

I bought in when it broke through the 50-day line, and the stock cleared a

52.43 buy point that same day. BZUN displayed some traits I really like to

see in a breakout: volume was 435% above average, it closed high in the

range and it held the pivot point.

How I Held It: BZUN went up from the get-go. I was tempted to add on

at points, but I don’t like to drive up my average cost per share on volatile

stocks. For this one, I just rode it and waited to either hit my profit target

or sell defensively if it broke the 50-day line.

My Sell Point: June 12, 2018 at 65. I had my standard 20-25% profit

target on this trade, and it crossed that threshold at 60. It was around

this time that the market was starting to act shaky, so I decided to sell

offensively around 65. That proved to be fortunate—it topped at 67.41

and then dove into a base. BZUN was at 51.50 just 15 days later; I would

have nearly roundtripped it if I ignored my profit target to chase a top.

My 4 Takeaways:

• Keep an eye on promising new growth areas. In this case, BZUN was

a hot type of stock (a Chinese ADR) in a hot industry group (Enterprise

Software).

• Be prepared to jump in quickly when earnings reports come out.

• Signs that point to a successful breakout: big volume plus a close at the

high end of the range and above the pivot.

• If a trade hits your profit target, it’s more than okay to sell offensively

and not worry about catching the very top.

18


BAD TRADE: TESLA (TSLA)

The Timeframe: October 2018 – December 2018

Stock Background: I thought Tesla was going to be the next Apple. I still

think it might. The fundamental story of this stock is what really excited

me: an innovative new product (advanced electric cars) that’s a cut above

everything else in the market. They have a big first-mover advantage in a

field that will grow exponentially in the next decade.

The fundamental numbers, on the other hand, had some warning signs

I overlooked because I was so bullish on the story. The company carries

a high debt ratio. Production problems with the cars meant that sales

growth had a hard ceiling. The company had years of negative earnings

per share. I overlooked

these signs because I

had a lot of conviction

in the company.

Technical Picture: There were plenty of

warning signs in the

technical picture. The

Cup-with-Handle base

that TSLA was forming

when I bought it was

very wide and loose,

with the right side of

the cup being really steep. The base just had a lot of technical flaws. But

maybe the biggest mistake was not waiting for a strong prior uptrend

preceding the base. CAN SLIM® relies on trends, so if there’s no prior

uptrend in the stock, it’s really an iffy bet.

First Buy

Added On

Sold

19


My Buy Point: October 25, 2018 at 310. I bought the stock when it

broke the 200-day line on nearly double average volume. It was still far

away from the 366.85 proper buy point of the base, so it was maybe an

aggressive alternative entry point.

How I Held It: Since it was going up, I was optimistic! I added to the position in the handle of the Cup-with-Handle at around 350. Which,

of course, drove up my average cost per share. Pretty soon TSLA hit the

proper buy point, but the breakout failed. There was low volume, mostly

sideways price action and waning relative strength. Plus the market was

really running into that bad December correction! TSLA started plunging

on December 14 and I held on to see if it would rebound.

My Sell Point: December 20, 2018 at 328. Having already given back

my profits, I sold my whole position when it crashed through the 50-day

line as part of its dive to a December low of 294. I roundtripped this one

badly. The sting of the trade was magnified because I had a relatively large

position size after I added to it, something you normally don’t want to do

with more volatile stocks because the big swings can crush your account.

My 4 Takeaways:

• Good fundamentals aren’t enough—you need to be patient and wait

for good technical setups.

• Sometimes your strong conviction in a stock can work against you.

• Tight, symmetrical bases and a 30% prior uptrend are really important

technical indicators.

• Smaller position sizes for volatile stocks help prevent big swings from

inflicting major damage on your portfolio.

20

The MarketSmith product team recently redesigned the interface to

make it easier to find new stock ideas. Above every MarketSmith chart

in the top-right, you’ll find the new orange “Open Stock Ideas” button.

Click it and you’ll see the top lists to check for your daily or weekly

stock research.

Features Highlight: Stock Ideas Button

Start Here for Trade Ideas

The Open Stock Ideas button is a great first step in your investing routine.

The window displays the current market trend at the top and has three

tabs to choose from: Uptrend, Correction and Earnings.

If the market is in an Uptrend, you’ll want to search those lists for potential

buys; many of the stock lists here are focused on stocks in the vicinity of

a buy point. If the market is in a Correction, those lists will feature the

strongest names to keep an eye on for when a new uptrend starts. The

Earnings tabs features lists of stocks that have reported earnings or will

soon do so. This is worth paying attention to, as earnings reports can

greatly affect the prices of stocks on the day they are released.

21

Daily Routines

Whether you selected the Uptrend or Downtrend tab, the Stock Ideas

window has the option for either a Daily Routine or a Weekly Routine.

The Daily Routine contains lists helpful for finding and monitoring stocks

throughout the week during and after trading hours. Daily lists and

screens are generally tighter and more focused on timely potential trades;

Breaking Out Today, Recent Breakouts and Near Pivot are the top 3 lists.

Weekly Routines

The Weekly Routine lists, on the other hand, represent a broader universe

of stocks, with some of these lists having over 100 names. During the

weekend when the market is closed, it’s an ideal time to cast a wide net

and look for new trading ideas you may not have come across during more

focused daily screens. These lists are filled with fundamentally strong

stocks that might not necessarily be near a buy point, but nonetheless

could be worth putting on your watchlist.

22

Resources

MarketSmith® Mobile Apps

MarketSmith has a full suite of tablet

and phone apps—and they’re included

with your subscription! Download

them today from the Apple App Store

and the Google Play Store, then log in with the same email and password

you use to access MarketSmith from your desktop. See how to get the

most out of the mobile apps in our Video Tutorials section by going to

the MarketSmith home page and hovering over the “Learn” section, then

selecting “Video Tutorials.” __________________________________________________________________________________

High-Powered Stock Lists

Pattern Recognition and the Growth 250 list are two of MarketSmith’s

most powerful features, and when you combine the two it creates timely

and highly selective stock lists. These G250 Pattern Recognition lists

make it easy to find all of today’s breakouts, plus recent breakouts, stocks

near a buy point, stocks in tight areas and stocks showing strong power

from their pivot point. Find them all in the lists window at the bottom of

MarketSmith by going to Reports > MarketSmith Growth 250 > G250

Pattern Recognition. __________________________________________________________________________________

Stay in Step with the Market

MarketSmith’s monthly “Stay in Step

with the Market” webinar is a must-

watch for timely market analysis and

evergreen investing strategies to help

you trade better. Our Senior Product

Coaches dive into the current market and analyze the trends, leading

stocks and potential breakouts that investors need to know. Watch the

latest episode at: Investors.com/mswebinars

STAY

23

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Get actionable investing content, unique financial stories and

live videos with market updates on our Facebook page.

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Get real-time updates on the stock market throughout the day

on Twitter. Tweet us @MarketSmith with your thoughts on the

market.

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IBD’s StockTwits allows you to connect with other stock traders

to get tips on growing your portfolio.

______________________________________________________________________

Reach out and network with the IBD® and MarketSmith® teams

on LinkedIn to get in-depth investing knowledge.

______________________________________________________________________

Check out Friday’s video market update for our take on the

market action in the week that was. Plus, you’ll find timely tips

for your stock research routine.

______________________________________________________________________

Our Instagram gives you a behind-the-scenes look at how the

IBD® and MarketSmith® teams work to help you succeed in the

market.

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THE MARKET

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Data provided under license agreement by William O’Neil + Co. Incorporated. All material presented here has been obtained or derived from sources believed to be accurate, but Investor’s Business Daily, Inc., MarketSmith Inc., and William O’Neil + Company, Inc. do not guarantee its accuracy and it may possibly be incomplete and/or condensed. The contents are based on the study and interpretation of available data as it relates to our historical models of the best performing stocks. This is not a prospectus; no effort on our part with respect to sale or purchase of any securities is intended or implied. Any chart appearing in this material is for educational purposes and is not, and should not be construed as a recommendation or rating to buy or sell any security. It is possible that at this date or some subsequent date the officers, directors and/or shareholders of William O’Neil + Company, Inc., MarketSmith Inc. and Investor’s Business Daily, Inc. and their affiliates own securities or buy or sell securities listed in the following pages or those not mentioned.

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Copyright © 2019, Standard & Poor’s Financial Services LLC (“S&P”). Reproduction of S&P US Index Data in any form is prohibited except with the prior written permission of S&P. Because of the possibility of human or mechanical error by S&P’s sources, S&P or others, S&P does not guarantee the accuracy, adequacy, completeness, timeliness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. S&P GIVES NO EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE. In no event shall S&P or its affiliates be liable for any indirect, special or consequential damages in connection with subscriber’s or others’ use of S&P US Index Data. (2012)

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Q2 STOCK GUIDE The Blue Dot List - Investor's Business Daily

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