The market is building on Friday's positive momentum, with big-cap technology stocks leading. Netflix (NFLX) is being chased higher, and there is relative strength in semiconductors which is pushing the Nasdaq 100 (QQQ) up 1.3% in the early going.
Breadth isn't as strong as on Friday, and there are limited pockets of momentum and very few new 12-month highs, but sentiment is positive due to optimism about upcoming earnings reports. Poor positioning is likely helping the bulls as shorts cover and underinvested longs look for additional exposure.
I'm looking for some new buys, but I don't see many charts I want to chase right now. Genius Sports (GENI) , which provides data for sports betting, is running up nicely this morning. Crocs (CROX) in the retail sector continues to develop very well. Aehr Test Equipment (AEHR) , which provides equipment that tests semiconductors used in electric vehicles, is one of the strongest momentum growth names.
My "Stock of the Week" is CECO Environmental (CECO) . CECO is an industrial company serving the industrial air, industrial water, and energy transition markets. It offers products for EV production, power generation, oil and gas, and polysilicon fabrication. On January 10, the company completed the acquisition of Wakefield Acoustics, which manufactures systems for noise cancellation in oil and gas production, power generation, and waste systems.
CECO has already announced that it expects fourth-quarter earnings to exceed $145 million, which is an increase of 60% over the same quarter last year and an increase of 42% on a sequential basis. Its year-end backlog is at record levels. Current EPS expectations for 2023 are $0.80, which is a forward PE of around 18. The company is expected to grow EPS by 143% in the calendar year 2023 once fourth-quarter earnings are announced in March.
Technically, CECO trades thinly and is slightly extended at this point, but it is the right niche at the right time, and business is the strongest it has ever been.
I want to put more money to work, but I'm staying highly selective and am not willing to chase in front of major earnings reports. The shorts are being squeezed, and I'm not convinced that this strength will be sustained.