Market Overview

It was a tale of two tapes in stocks last week. The Dow Jones Industrial Average led the way to the upside, and blasted off to a new all-time high. It finished up 2.50% on the week. But the tech-heavy Nasdaq fared much worse, as it closed down 1.84%. The S&P 500 finished mostly flat, and just 0.10% lower. The sector leadership underneath the surface is painting a very cautionary tale near-term. Still, it's setting up the biggest and best buying opportunity of 2026. Crypto markets crashed and have erased all of their gains since last year's low. It's still an environment to tread carefully although there are still pockets of opportunity.

Stocks I Like

Herbalife (NYSE:HLF) – 76% Return Potential

What's Happening

• Herbalife Ltd. (HLF) is a leading global nutrition company operating through a multi-level marketing model, developing and distributing science-backed health and wellness products focused on weight management, targeted nutrition, energy, sports and fitness, outer nutrition, and personal care, offering investors exposure to the rapidly growing direct selling and consumer health sector with a focus on meal replacements, supplements, and lifestyle solutions distributed via independent distributors worldwide.
• The last quarter had revenue of $1.27 billion and earnings of $51.5 million.
• The valuation in HLF is very fair. Its P/E is at 5.56, its Price-to-Sales is at 0.36, and its EV to EBITDA is at 5.99.
• From a technical standpoint, HLF is bullish as long as it continues to trade higher within the ascending price channel.

Why It's Happening

• Herbalife Nutrition Ltd. is staging a compelling turnaround under new leadership and strategic initiatives, with Q3 2025 net sales rising 2.7% year-over-year to $1.3 billion—exceeding guidance midpoint—driven by stabilized volumes and a return to growth in North America. This reflects successful efforts to resolve past regulatory pressures, strengthen distributor relationships, and refocus on core nutrition products, positioning the company for mid-single-digit revenue growth in 2026 and beyond as it shifts toward sustainable, product-led expansion in the global wellness market.
• Innovation in health and wellness products drives renewed consumer interest and revenue potential. Recent launches like skin-health solutions (HL/Skin) and weight-loss supplements (MultiBurn) are expected to accelerate growth, while digital transformation and tech integrations enhance distributor tools and customer engagement. These moves address evolving demands for personalized nutrition, helping Herbalife recapture momentum in key categories and build a more resilient, modern brand narrative.
• Improving profitability and margin resilience highlight operational progress. Q3 2025 adjusted EPS of $0.50 beat estimates, with ongoing cost discipline and reduced promotions supporting better full-price selling and margin expansion. As the company deleverages its balance sheet and prioritizes debt reduction, this foundation enables sustained investments in growth areas, creating a story of transitioning from volume challenges to higher-quality earnings in a stabilizing macro environment.
• Global diversification and regional recovery bolster Herbalife’s long-term stability. With strength in emerging markets and early signs of North American inflection, the company benefits from broad geographic exposure that mitigates single-region risks. This balanced footprint, combined with a focus on high-margin wellness categories, aligns with rising global interest in health and nutrition, supporting consistent performance amid economic cycles.
• The stock has a short interest of around 12%, which could set it up for a modest squeeze.
• Analyst Ratings:
  • Mizuho: Neutral
  • Maxim Group: Buy
  • Citigroup: Buy

My Action Plan (76% Return Potential)

• I am bullish on HLF above $14.50-$15.00. My upside target is $30.00-$32.00.

Cenovus Energy (NYSE:CVE) – 50% Return Potential

What's Happening

• Cenovus Energy Inc. (CVE) is a leading integrated energy company focused on developing, producing, refining, transporting, and marketing crude oil, natural gas, and refined petroleum products across Canada, the United States, and China, with key operations in oil sands (including Foster Creek, Christina Lake, and Sunrise projects), conventional assets, offshore activities, and refining facilities, offering investors exposure to the rapidly growing energy production and integrated oil sector with a focus on sustainable operations, heavy oil expertise, and value creation in the energy transition.
• The previous quarterly report showed revenue of $14.05 billion and earnings of $1.38 billion.
• Valuation is fair in CVE. P/E is at 15.34, Price-to-Sales is at 0.87, and EV to EBITDA is at 6.27.
• At a technical level, CVE already broke out from a rectangle formation. This implies a continuation of the bull trend but it needs to successfully retest the former resistance line first.

Why It's Happening

• Cenovus Energy Inc. is strengthening its integrated oil and gas profile through the successful integration of the MEG Energy acquisition, boosting upstream production guidance to 945,000–985,000 BOE/d in 2026 (approximately 4% growth from 2025 midpoint). This scale enhancement, combined with disciplined capital allocation and improved refining utilization targets of 91%–95%, positions the company to generate robust free cash flow in a supportive oil price environment driven by energy security needs and constrained supply dynamics.
• Potential Deep Basin asset sale creates a clear deleveraging catalyst following the MEG deal. With reported consideration up to ~C$3 billion, this strategic divestiture of conventional assets would enhance balance-sheet flexibility, reduce net debt pressures, and allow Cenovus to focus capital on high-return oil sands and refining operations, reinforcing its narrative as a value-oriented integrated producer capable of unlocking shareholder value through portfolio optimization.
• Improving operational efficiency and margin strength underscore Cenovus’s execution progress. Recent quarters have shown material profitability gains despite softer revenue, with higher gross margins and earnings reflecting better realizations, cost controls, and downstream improvements at facilities like Lima and Toledo. This operational resilience supports sustained cash generation and positions the company to outperform peers as refining margins stabilize and upstream volumes ramp.
• Attractive valuation and shareholder returns enhance Cenovus’s appeal in the energy sector. Trading at compelling multiples relative to cash flow and with a solid dividend yield, the company benefits from analyst targets implying meaningful upside (averaging around $22–$23 USD with highs up to $32), while its focus on debt reduction, buybacks, and disciplined spending creates a compelling case for long-term total returns amid recovering oil fundamentals.
• Analyst Ratings:
  • RBC Capital: Outperform
  • Goldman Sachs: Buy

My Action Plan (50% Return Potential)

• I am bullish on CVE above $17.00-$18.00. My upside target is $30.00-$32.00.

Meta Platforms (NASDAQ:META) – 58% Return Potential

What's Happening

• Meta Platforms, Inc. (META) is a leading global technology company owning and operating the world’s largest social media and communication ecosystem, including Facebook, Instagram, WhatsApp, Messenger, and Threads, while advancing in artificial intelligence, augmented/virtual reality (via Reality Labs), and metaverse technologies, offering investors exposure to the rapidly growing digital advertising, social networking, AI, and immersive tech sector with a focus on connecting billions of users, innovative AI assistants, and next-generation human experiences.
• The company reported $59.89 billion in revenue in the last quarter, along with $22.77 billion in earnings.
• Valuation in META is in orbit. P/E is at 15.34, Price-to-Sales is at 0.87, and EV to EBITDA is at 6.27.
• From a charting viewpoint, META just completed a reversal pattern via a rounding bottom. This signals that the corrective downtrend is complete in this stock.

Why It's Happening

• Meta Platforms Inc. is dominating the digital advertising landscape with AI-powered enhancements driving explosive revenue growth, as Q4 2025 results showed $59.9 billion in revenue (up 24% year-over-year) and a strong Q1 2026 outlook of $53.5–$56.5 billion. This momentum, fueled by superior ad ranking and recommendation systems, positions Meta to sustain mid-20%+ growth in 2026 while monetizing its massive user base more efficiently than competitors.
• Aggressive AI investments are paying off and set to accelerate in 2026, with capex guidance of $115–$135 billion focused on infrastructure for next-gen models like Llama and multimodal capabilities. These bets are already improving ad efficiency and engagement, creating a powerful “demand machine” that analysts see delivering outsized returns and enabling revenue acceleration even amid elevated spending.
• Emerging monetization engines like WhatsApp, Threads, and AI-driven tools offer massive untapped potential. WhatsApp’s run rate could scale from ~$9 billion today to $36 billion by FY29, while Threads and Llama integrations add new revenue streams, diversifying beyond core ads and positioning Meta for compounding growth in messaging, open-source AI, and agentic experiences.
• Attractive valuation relative to peers provides compelling risk/reward. Trading at a significant P/E discount to Alphabet and with strong free cash flow generation, Meta offers upside from AI execution, with analysts forecasting potential EPS over $33 by FY27 and highlighting a low bar for estimates given conservative consensus assumptions on margins and growth.
• Analyst Ratings:
  • Cantor Fitzgerald: Overweight
  • Rosenblatt: Buy
  • B of A Securities: Buy

My Action Plan (58% Return Potential)

• I am bullish on META above $600.00-$605.00. My upside target is $1050.00-$1100.00.

Market-Moving Catalysts for the Week Ahead

The Dangers of a Tech Wreck

The S&P 500 is heavily concentrated in the tec sector, which accounts for roughly 30% of the index’s total market capitalization weight. It's followed by Financials at roughly 14.7%, Consumer Cyclical (Discretionary) at 10.6%, Communication Services at 10.2%, and Healthcare at 10.1%, with smaller allocations in Industrials (9%), Consumer Staples (5%), Energy (~4.6%), and the rest in Utilities, Real Estate, and Materials.

This market-cap-weighted structure means mega-cap tech stocks like Nvidia, Apple, Microsoft, and others exert outsized influence—often dominating index movements. When tech underperforms, the S&P 500 can still decline or lag significantly even if many other sectors post strong gains, because the heavy weighting of tech drags the overall cap-weighted index lower despite broader participation elsewhere.

This concentration highlights why equal-weighted versions of the index often tell a different story during such rotations. We'll know soon enough if this is just a run-of-the-mill rotation or the start of a real downswing lower.

Breadth Divergence

Despite the weakness at the index level, it's not all negative out there underneath the surface. Last week, there was a surge in 52-week highs in both the New York Stock Exchange and the S&P 500. This isn't something you would see in a market that's about to turn bearish.

Instead, this supports the idea that the volatility in stocks right now is part of a regular, cyclical correction. If anything, this is serving to reset the market's sentiment right now – for a while there, bulls were dominating the tape. These pullbacks help to bring sentiment back to earth.

But given the carnage in the tech space, I won't be ready to signal the "all clear" until it starts to outperform again. Tech is known to lead coming out of market bottoms, and it's also known to lead to the downside once markets top. It's really just a waiting game at this point.

Sector & Industry Strength

Another week has passed, and more deterioration has crept into the market's internals. All of the defensive sectors like energy (XLE), consumer staples (XLP), and healthcare (XLV) have continued their recent momentum, which is a big concern for bulls.

To make matters worse, the risk-on and growth-oriented sectors in technology (XLK) and consumer discretionary (XLY) are the worst-performing sectors going back to the start of the fourth quarter now. This is not something you see in a healthy tape.

It has become a tale of two tapes at this point. Of the top five performing sectors, only industrials (XLI) could be construed as truly bullish. A case could be made for basic materials (XLB), but it depends more on the overall economic environment. The current sector leadership still warns of caution in the near-term.

1 week	3 Weeks	13 Weeks	26 Weeks
Consumer Staples	Energy	Energy	Energy

Editor's Note: Consumer staples leading near-term is not what bulls want to see.

A Seismic Sector Shift (Sector ETF: XLE/XLK) 

It's been a tale of two tapes lately for the energy (XLE) and the tech (XLK) sectors. Tech is the most important sector in the market, as it makes up around 30% of the S&P 500, while energy makes up around 3%.

In other words, without the tech sector participating, and more importantly, outperforming, the indices are going to have a tough time. It's why this potential breakout from a rounding bottom formation in this ratio is so notable.

Energy hasn't outperformed the tech sector since 2022, which ended up being the longest bear market since the 2008-2009 financial crisis. If this ratio takes out the high from March 2025, it would signal a new bull trend in favor of energy over tech. This could spell trouble for stocks in time.

Needs Outperforming Wants (Sector ETF: XLP/XLY) 

Consumption dominates the U.S. economy. It makes up around 70% of GDP. People spend money on a variety of things, but it can be broken down simply into needs versus wants. We can gauge this in markets by comparing consumer staples (XLP) and consumer discretionary (XLY).

The logic behind this ratio is simple. When consumer discretionary (what people want) outperforms consumer staples (what people need), it's bullish. When staples outperform discretionary, it's bearish.

It's therefore no surprise to see how this ratio dropped for the past couple of years – stocks have been hitting new highs. But it's started to climb in favor of XLP over XLY in recent weeks, which is a warning sign. I'm watching to see if it can tag the downward sloping trendline of the past couple years.

The Fed Could be in Big Trouble (Sector ETF: TIP/IEF) 

Based on some of the behavior in the bond market, the recent moves in energy are worthing believing. The bond market typically has a better feel of what's going on compared to anything else, so it's time to check in on the ratio between Treasury Inflation Protected Securities (TIP) and 7-10 Year Treasuries (IEF).

When TIP outperforms IEF, or this ratio rises, it means that the bond market is sniffing out higher inflationary pressures. If this ratio is dropping, it means that the bond market doesn't deem inflation as a threat.

For a couple years now, this ratio has consolidated into the symmetrical triangle formation. This often leads to continuations in trend. If the ratio breaks above the upper trendline of the formation, the Fed is going to have a tough time justifying rate cuts from here.

Cryptocurrency 

Back to Ethereum this week as the carnage in the crypto sector continues. The infamous four year cycle is unfolding in front of us right now as Ethereum trades back at levels not seen since May 2025.

Over the past week, Ethereum collapsed below technical support in the 2600-2800 zone. The path of least resistance remains lower as long as it stays below there, but it's also breaking the next support zone at 2100-2200.

This means we could be setting up for a final washout down to the 1650-1750 zone. It tagged the upper bound of this late-last week. This is going to be a big test because if Ethereum holds this level, it could be setting up conditions for an important bottom. It could be one of the best buying opportunities in years.

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