Candlestick Forum Long Term Stock Picks Newsletter December, 2015

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1 Candlestick Forum Long Term Stock Picks Newsletter December, 2015 Current Market Outlook: Remain bullish for now. It s hard to say much more than stay bullish in the current market environment. The major indexes we follow are all back near all-time highs, and the market charts have formed nice little cup-and-handle setups over the past few weeks, usually a bullish sign. More details follow Current Market Commentary: Well, as I m typing these words we are just exiting the Thanksgiving holiday break here in the U.S. If you chose to celebrate, I sincerely hope you had a wonderful, relaxing time with your friends and loved ones... and I hope you have worked your way through any turkey comas. We do indeed have a lot to be thankful for here in the Land of the Free and the Home of the Brave. And now it s time to get back to work, and discover how to extract large chunks of cash from this giving stock market! We also just experienced two of the most exciting times of the year for retailers Black Friday and Cyber Monday. These two days are usually the busiest times of the year for sales, and millions of folks take advantage of hundreds of tremendous bargains during just these two days (although most retailers extend the sales through the weekend and beyond).

2 How did the retailers do this year? Not too bad, if you look at online sales only. In fact, Cyber Monday sales from midnight through 3:00 PM Monday are estimated to be up 18.1% - way up vs s sales gain of 8.5%. And mobile sales transactions made over smart phones, tablets and other portable devices are stealing the show. Adobe Systems Adobe Digital Index, which claims it measures 80% of transactions for the top 100 U.S. retailers, projected U.S. Cyber Monday sales to hit $3 billion and to be the largest online sales day of the year. Adobe said that mobile traffic accounted for 53% of shopping visits and 32% of sales. So will this display of consumer confidence spark a Santa Claus rally? It sure looks that way. December 2015 started off with a bang with the Dow up a solid points (0.95%), the Nasdaq up an exciting points (0.93%) and the S&P 500 was the star of the day up points, a nice 1.07%. So for now, it seems that all systems are go for the markets. But always stay alert, because things could change in a heartbeat. Fortunately, candlestick analysis will immediately let us know when that happens. OK, let s see what the general market charts are telling us

3 Major Index Chart Analysis: Dow Jones Industrial Average On all three charts that follow, for educational purposes, I want you to notice two major formations: 1) The nice cup-and-handle setup formed in November, and 2) The obvious reversal formation in mid-november. The Dow is flirting with that 18,000 area again, close to near all-time highs. Today s action shows a little breakout above the past seven trading days of consolidation that formed the handle in the overall formation. Volume could have been stronger on the breakout, but we ll take whatever we can get. Stochastics are gorgeous, angling up higher and about to cross over in the midrange area, with lots of room to move on the upside. Take note of the textbook buy situation in mid-november, with a very nice Bullish Engulfing signal with stochastics at rock bottom, crossing over and reversing strongly back northward.

4 S&P 500 The S&P 500 chart shows more or less the same characteristics as the Dow s, except the index is a tad more overbought than the Dow, since the stochastics are angling up in the 75 slightly overbought area. According to Investor s Business Daily, a key level for the S&P 500 to overcome is 2116, its November 3 rd intraday high. The bulls would like to see a move above this level, preferably in strong volume, because it would constitute an upside breakout.

5 NASDAQ The NASDAQ s chart shows more of the same as its big brothers, except it may be even a little more overbought short-term. Again according to Investor s Business Daily, the line in the sand for the Nasdaq bulls is A breakout above that level on strong volume might be a solid back up the truck and buy signal for lots of great Nasdaq stocks. There are indeed lots of great stocks and charts to choose from in this market. Let s take a look at some of those now

6 Favorite Long-Term Stock Pick of the Month: About the Company: Cambrex Corp. (NYSE: CBM) Cambrex Corp (CBM) - Develops active pharmaceutical ingredients, pharmaceutical intermediates and other products to aid human therapeutics. According to Yahoo Finance: Cambrex Corporation, a life sciences company, provides various products and services for the development and commercialization of new and generic therapeutics worldwide. The company s products comprise active pharmaceutical ingredients and pharmaceutical intermediates that are used in the production of prescription and over-the-counter drug products. It serves generic drug companies and companies that discover and commercialize small molecule human therapeutics. The company sells its products directly, as well as through independent agents. Cambrex Corporation was founded in 1981 and is headquartered in East Rutherford, New Jersey. Why We Like It: According to Investor s Business Daily With profit margins on the rise, Cambrex raised its full-year outlook, pegging its adjusted EPS from continuing operations from $2.11 to $2.19, representing a 59% to 65% year-over-year increase. The earlier forecast was $1.97 to $2.09 a share. Analysts consensus estimate of 60% EPS growth this year ranks as one of the highest of 118 companies in the medical products group.

7 Cambrex has one of the highest three-year EPS growth rates (35%) in the group. The small cap s sales growth rate over three years is 16%. Chart Analysis: CBM Six Months Daily I ve liked this stock for quite some time, but it s been in a consolidation area since the August market downturn. But as you can easily see on the chart the stock has carved out a massive cup and handle formation, and is breaking out to the upside from that pattern, a very bullish sign. Stochastics are a little suspect angling down in the slightly oversold area - and may indicate a little more consolidation is necessary prior to a big breakout. I think you can at least nibble some CBM right here, with a stop in the recent support area around $48. And back up the truck and buy if it pierces $54.50 on strong volume to the upside.

8 Stocks on the Watch List: There are lots of other great stocks and charts to choose from in this possible Santa Claus rally. Let s take a look at three strong stock charts now WisdomTree Investments Inc. (NASDAQ: WETF) WisdomTree Investments Inc. (WETF) - Provides asset management services for exchange-traded funds in the U.S. ETFs (Exchange Traded Funds) remain very popular with investors, and WisdomTree has become the world s seventh largest sponsor of exchange traded products. As you can see on the chart, WETF is moving out of a three month long cup formation, so our timing is fairly good on this one. Chart purists may wait for a strong breakout above overhead resistance and the prior highs in the $26 area.

9 Fundamentals are extremely strong. Last quarter EPS came in at +89% and prior quarter at +100%. The company is growing earnings at an annual rate of 75%, not too shabby. The P/E Ratio is 42, so there s some GARP (Growth At A Reasonable Price) there as well. Finally, while waiting for more upside, you can enjoy a dividend of 1.47% - a lot more than you re probably making on your CD s right now! I think it s OK to buy some WETF right here, and back up the truck and buy on a strong breakout above that overhead resistance at $26. The sell stop looks to be in the recent support area of $20. Netease Inc. ADR (NASDAQ: NTES) Netease Inc. ADR (NTES) - Chinese provider of an interactive online gaming community, internet portal and wireless value-added services. Chinese stocks have rebounded with a vengeance after a vicious summer selloff. NTES, for example, has screamed northward virtually non-stop

10 since its September bottoming process, and is hitting a new all-time high in price! That s a nice chart, and the company s fundamentals are solid as well. With a 3-year EPS growth rate of 21%, current year earnings estimates at 24%, last quarter earnings coming in at +56%, a 3-year sales growth rate of 28%, last quarter sales coming in at a solid +107%, a rock-solid annual ROE of 23.17%, and a yield of 1.32%, NTES has a LOT going for it, and looks good as a mid- to long-term holding. With the stochastics angling up sharply from the midrange area with plenty of room to run, this stock looks like a good buy right here, stop around $140. Opus Bank (NASDAQ: OPB)

11 Opus Bank (OPB) - Provides commercial and personal business banking in California, Washington and Arizona through 60 offices. I d be remiss if I didn t include another bank stock here, since banks have been on a tear for some time now with the threat of higher interest rates and therefore higher profits for financial institutions like banks. For this one though, I would wait for a strong breakout above that troublesome $40 overhead resistance area. The company s fundamentals are strong though. With a 3-year EPS growth rate of 41%, current year earnings estimates at 40%, last quarter earnings coming in at a strong +91%, a 3-year sales growth rate of 19%, last quarter sales coming in at a solid +37%, OPB has a lot of good things going on, and looks good as a mid- to long-term holding. $36 seems to be an obvious stop-loss point. On behalf of everyone here at the Candlestick Forum, I want to wish you a very Merry Christmas, Happy Holidays and a very Happy and Prosperous New Year! See you in 2016!