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PreMarket Prep Recap: Sector Rotation From Growth To Value And How To Analyze A Value Stock In Play

Joel Elconin

In addition to covering the after-hours and pre-market action, the PreMarket Prep Show emphasizes trading education and helps investors hone their current strategies as well as create new ones.

Primarily during the first half of today's show, co-host Dennis Dick shared a few of his multiple trading strategies.

Value Still In Vogue

At the top of the show, the continued rotation from growth to value stocks was discussed. Since both of the co-hosts are primarily value investors, we are cheering the recent price action in the markets.

Over the past month, companies with low P/E ratios (less than 10) have been moving higher, while investors rotate out of high P/E ratios (10 or higher, some in triple digits). This is in contrast to the past few years, when growth stocks have been in favor and value stocks have been out of favor. Since rotations of this nature tend to be longer term, the current one may just be getting started.

Value Stock In Play

Before the open, it was reported Xerox Holdings Corp (NYSE: XRX) was considering buying HP Inc (NYSE: HPQ) in a cash and stock deal. HP trades at a modest forward P/E of 8 and has the capability to be a leader in 3D printing sector.

Since no definitive deal or price has been announced, investors that were long the issue should be patient and wait for the official deal to be announced. Of course, shorting a stock that may be in play is a no-no. Investors that were long and reached or exceeded their target should consider taking profits. The reason being, if a deal does not materialize, HP could be back at $18.50 in a heartbeat.

The issue opened into a wall of resistance at the $21.50 area and some of its pre-market gains. Moving forward, today's high ($21.64) will be an important technical level moving forward as the issue make 13 consecutive daily highs just above and below $21.50 back in mid-July.

Finding Resistance In Cyberark After Q3 Beat

Before the open, Cyberark Software (NASDAQ: CYBR) was trading sharply higher after a solid third-quarter beat and raised guidance.

Since missing out on being long the issue ahead of the report, the hosts were looking for potential resistance for a fade of the rally. Based on the daily charts, there were only two clear areas of possible resistance. The first being its Aug. 23 high ($119.80) and the second being the pairs of highs at the $121.50 from the two days prior.

In a volatile session, the issue peaked just below the Aug. 23 high at $119.99 and has been drifting lower.

Tim Courtney Joins The Show

Midway through the show, Tim Courtney of Exencial Wealth Advisors ($2.4 billion AUM) joined the crew to discuss the rotation from growth to value in the markets.

On Thursday's show, David Trainer of New Constructs Investment Research Firm will be our guest.

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