These 10 Stocks Could Gain 10% By Year End

MKM Partners technical analyst Jonathan Krinsky isn’t–and hasn’t been–a fan of the overall market but that doesn’t mean he thinks investors should stay far away. Instead, he offers 10 stocks that have “lagged drastically” this year but could rise at least 10% by year-end. He explains:

Reuters

The S&P 500 continued to grind higher last week, gaining a modest 0.39%, but good enough for its fourth consecutive weekly gain. The intra-week range was extremely narrow at just 0.78%, the seventh narrowest in the last 20 years. While the rate of ascent has slowed, the lack of any pullback in the major averages has been quite remarkable. On Friday the SPX closed above its 5 Day Moving Average for the 21st consecutive day. In the last 20 years, there have only been two such streaks that lasted longer. The most logical explanation is that many participants are trailing benchmarks, and are using any weakness to add in an attempt to catch-up. Despite the lack of movement in the SPX, there was continued deterioration in the Energy sector (-2%). This has kept downward pressure on the high yield index, of which energy is the largest weighting. The U.S. continues to be the best market globally, reaching multi-decade highs vs. the MSCI World Index. As a result, sentiment has become quite optimistic with the AAII Bull-Bear spread reaching the highest level in four years. While we still find the risk/reward in the “market” quite poor on a near-term basis, we recognize that the need to participate is real.

But who care about that right? You’re here for the stocks, so without further ado: AK Steel (AKS), teen-retailer Five Below (FIVE), FireEye (FEYE), GameStop (GME), Lululemon Athletica (LULU), Las Vegas Sands (LVS), MBIA (MBI), Peabody Energy (BTU), PulteGroup (PHM), Twitter (TWTR).

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Krinsky explains why these stocks might be attractive:

Following the October low in equities, the correlation between stocks has completely broken down. Part of this is likely attributed to the energy sector, which has remained near its correction lows. While this low correlation can be viewed as a warning sign for the broad market (contrary indicator), it also provides opportunity to generate alpha. With the consensus that many participants are trailing their benchmark, and therefore forced to play catch-up, we found ten stocks that have significantly lagged the broad market YTD, and that we believe have at least 10% of upside potential into year-end on a technical basis. Most of these are not structurally bullish charts, but they all have near-term tactical qualities that should make them worthy of a trade over the next six weeks.

AK Steel, for instance has “strong support at $6, look for it to build off this level heading into year end,” Krinsky says, Las Vegas Sands is “breaking a short-term downtrend.” Peabody Energy, meanwhile, has a “short-term base, has plenty of room above $12,” and Twitter is “now trying to bounce off support,” and has room to trade as high as $48. And GameStop? It’s been basing for nearly a year and has “plenty of upside,” Krinsky says.

Of course, the fact that the year is ending means that investors are more likely to add to their winners and sell their losers heading into year end. And that’s what’s happening to most of these stocks today. AK Steel has dropped 1.4% to $6.45 at 12:31 p.m. today, while Las Vegas Sands has fallen 1.5% to $62.53, Peabody Energy has declined 0.9% to $11.29, GameStop is off 0.6% at $44.13 and Twitter has tumbled 2.7% to $40.72.