
Stocks to Watch This Week: October Was Great but What About November?
Despite falling Friday, stocks as tracked by the S&P 500 ETF (SPY) - Get Report climbed in October, the best monthly gain in four years.
While the market has been in a rally, it seems likely to go lower in the coming week, Guy Adami, managing director of Stockmonster.com, said on CNBC's "Fast Money" TV show. He bases that on how stocks traded Friday. He's expecting a short-term pullback of 2% to 3% from current levels.
The first level of support will come into play around 2,060 in the S&P 500, added Steve Grasso, director of institutional sales at Stuart Frankel. Friday's selloff was caused when pension funds and mutual funds locked in gains after a very strong month. Grasso thinks stocks can still move higher.
David Seaburg, managing director and head of sales trading at Cowen, reminded investors that many hedge funds are lagging the S&P 500 this year. These managers are looking to get into growth stocks, hoping to boost their performance into the end of the year.
Brian Kelly, founder of Brian Kelly Capital, was more downbeat, suggesting the current rally is just a bear market rally and stocks are inevitably headed lower. He pointed out the financial sector has not rallied as much as the overall market. Adami agreed, saying earnings and economic data have been mixed at best.
Coming into another earnings week, what company should you be buying?
Seaburg is taking Wendy's (WEN) - Get Report over Shake Shack (SHAK) - Get Report . While Shake Shack will have great results, it will be hard for the stock to rally since its valuation is so high, Seaburg explained.
Kelly expects Kate Spade (KATE) to have great results but would rather have a long position in Michael Kors (KORS) . Kors is likely to perform better after earnings because expectations are so low, he said.
Adami is taking Disney (DIS) - Get Report over CBS (CBS) - Get Report . He said the stock has been trading great lately while CBS has been underperforming since 2014. He predicts Disney's management will not allow for two disappointing earnings reports in a row.
Tesla Motors (TSLA) - Get Report and Toyota Motors (TM) - Get Report both report and Grasso prefers Tesla, whose stock is trading near support at $200 and looks to be headed higher. Adami sees Tesla at $180. Tesla closed Friday at $207.
Valeant Pharmaceuticals (VRX) shares plunged another 16% following a presentation by shareholder and activist investor Bill Ackman. The stock is now down 47% for October and off 64% from its 52-week high.
Adami said investors should continue to avoid the stock. Although the decline may have investors thinking it's at an attractive level now, Valeant is simply too "toxic" to own.
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