Jeff Parent, chief investment officer at Castlemoore

FOCUS: Technical analysis 

MARKET OUTLOOK:

There’s a little concern we have with the markets now. Since around the end of May and into June, most developed markets are dropping quickly. Examples are Mexico, Brazil, France, etc. Canada has been having trouble maintaining new highs first reached in 2022 due to the heavy weighting of the underperforming banks. The U.S. has been insulated with their tech sector and specifically, Nvidia.

We are wondering now if the so-called AI stocks have been overhyped. There’s a lot of parallels to early 2000 with the internet hype-train crash. If Nvidia doesn’t maintain a 35 per cent earning growth rate over the next five years, then it has the potential to drop well over 30 per cent or much more and bring down a lot of highly correlated stocks with it as well as U.S. markets in general. We’re not there yet, and hopefully, the other markets stabilize and we see some new buying coming in. Lower interest rates will of course help, and this could spur on the other 490 stocks in the S&P 500. Right now we are maintaining a low cash balance and are still buyers.

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TOP PICKS:

Altagas (ALA TSX)

Expected to raise dividends, currently at 3.8 per cent, with good guidance in May’s earnings release, and deleveraging makes their financials look good. Technically, a small pullback to the 29 range is a buying opportunity and a good support level. Expect to see mid-30s. Sell below 28.

Microsoft (MSFT NASD)

Reaching into new territory again after a five-month pause in the low 400s. Big and growing install base with performance in the AI sector. Could drop back to the 420 level, but only sell if it moves below 400. Might split.

Mueller Water Products (MWA NYSE)

Found this scanning through stocks with good earnings momentum. Had a nice pop on their last quarterly earning and continuation for a while. Has pulled back to the breakout level which often indicates a strong support level. Sell below 16.

PAST PICKS: August 24, 2023

Direxion Daily 20+ Yr Treasury Bull 3X (TMF NYSEARCA)

(1 for 10 stock split – December 4, 2023)

• Then: US$6.05
• Now: US$52.48
• Return: -13%
• Total Return: -11%

Carnival (CCL NYSE)

• Then: US$15.71
• Now: US$16.25
• Return: 3%
• Total Return: 3%

Gibson Energy (GEI TSX)

• Then: $19.64
• Now: $22.99
• Return: 17%
• Total Return: 24%

Total Return Average: 5%