(Please enjoy this updated version of my weekly commentary from the POWR Growth newsletter).

One of my favorite books that I reread at least once a year is Reminiscences of a Stock Operator. The book is a compilation of the learnings of famed speculator Jesse Livermore who managed to build and destroy multiple fortunes. Despite the book being nearly a century old, it contains multiple lessons that remain applicable today.

The one that really resonates is the importance of patience. Livermore talked about how his worst decisions came when he was “eager for action”, and his best trades came after long periods of inaction.

From his book: “The desire for constant action irrespective of underlying conditions is responsible for many losses in Wall Street even among the professionals, who feel that they must take home some money every day, as though they were working for regular wages.”

Intuitively, we know this, but we still don’t always put it in practice.

However, this will be a focus for our service and I believe it’s one of the differentiators of the POWR Growth service. Not only do we avoid the most dangerous and overvalued growth stocks, we also understand when it’s time to be patient.

There will be a time to be aggressive. We will remain vigilant in monitoring the market and make appropriate adjustments, once we are back in a trending market.

 Opportunities on the Horizon

Part of the vigilance is constantly monitoring the market landscape to stay on top of any opportunities that may be developing.

In our webinar, I discussed one such area – real estate technology stocks. These are the tech stocks like Zillow, Redfin, OpenDoor, and Fathom Holdings which are disrupting the real estate market.

We’ve seen tech companies disrupt all types of industries and in general, they lead to lower transaction costs, more transparency, and faster execution. Thus, there’s a tremendous opportunity to do this in real estate. The real estate services market is estimated to be $1 trillion and is full of inefficiencies.

I’m excited by the potential of these companies to modernize this market. Given the huge market, there will be multiple winners. On top of this, many of these stocks are down by more than 50% over the past couple of months and their POWR Ratings are showing substantial signs of improvement.

Another opportunity is in buying Market Leaders. Usually, the only way to buy a Market Leader during a bull market is on a 10% or so dip. However, the sell-off in growth stocks has created opportunities to enter Market Leaders at a deeper discount.

Further, many of these companies continue to post strong earnings reports, while their stock prices have traded sideways over the past 6 to 9 months.

This means that multiples are quite low. Thus, these stocks could have two catalysts: earnings growth and multiple expansion. Such an opportunity is rare in a bull market, and I’m eager to take advantage of it.

 Market Outlook

Very little has changed in terms of the market outlook. We are still stuck in a range. Economic data continues to come in strong which is consistent with the early stages of a powerful recovery. Earnings have also come in above expectations across the board.

Yet, the stock market has remained range-bound and frustrated impatient bulls who expected that such good news would lead to a powerful breakout.

Instead, we have a sideways, choppy market which is now moving from the lower-end of the range to the upper-end. I expect that we will challenge the top of the range and potentially even have a small breakout which could be reversed just like in early May when the S&P 500 briefly broke above 4,200.

My instinct is to look to take some profits on such a move as I don’t see the market having enough participation for a meaningful breakout that keeps going higher. Currently, the market is being led higher by industries such as consumer staples, precious metals, big-box retailers, and defense stocks along with tepid bounces in severely beaten down growth stocks.

I would adjust this stance if we start seeing more participation across a variety of sectors and bigger bounces in oversold stocks and sectors. If you study previous trending moves in markets, they start off with massive amounts of money moving into the markets almost indiscriminately.

One consequence of this is you see mind-boggling moves in oversold stocks and sectors which will recover 30-50% of losses in a matter of days. An absence of this makes me more skeptical of the market’s ability to sustain an advance.

 Market Commentary Summary

Just to be clear, the market remains in a bull market supported by earnings growth, an improving economy, and low rates. Within that bull market, we are in a digestion phase.

Most likely, we will break higher from this range given the underlying strength and fundamentals. However, the longer we are in this range, the warier I get of a breakdown.

Thus, I’m prepared for both possibilities and ready to take appropriate action if and when necessary.

What To Do Next?

The POWR Growth portfolio was launched in early April and is off to a fantastic start.

What is the secret to success?

The portfolio gets most of its fresh picks from the Top 10 Growth Stock strategy which has stellar +46.42% annual returns.

If you would like to see the current portfolio of growth stocks, and be alerted to our next timely trades, then consider starting a 30 day trial by clicking the link below.

About POWR Growth newsletter & 30 Day Trial

All the Best!

Jaimini Desai
Chief Growth Strategist, StockNews
Editor, POWR Growth Newsletter

SPY shares rose $1.33 (+0.32%) in after-hours trading Thursday. Year-to-date, SPY has gained 12.51%, versus a % rise in the benchmark S&P 500 index during the same period.

About the Author: Jaimini Desai

Jaimini Desai has been a financial writer and reporter for nearly a decade. His goal is to help readers identify risks and opportunities in the markets. He is the Chief Growth Strategist for StockNews.com and the editor of the POWR Growth and POWR Stocks Under $10 newsletters. Learn more about Jaimini’s background, along with links to his most recent articles. More...

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