WHAT TO DO NOW: In the Model Portfolio, we’re selling Exact Sciences (EXAS), which will boost our cash level to around 18%. Details below.
Growth stocks were hit hard today, though they found some support in the afternoon. At day’s end, the Dow was down a modest 32 points, but the Nasdaq was off a more severe 48 points.
Bigger picture, we remain optimistic that the market’s next big move is up, as our long-term Cabot Trend Lines are still bullish, most leading stocks (while pulling back sharply) have not broken down and the blastoff indicators from January and February portend higher prices down the road.
Near term, however, the market has clearly lost some steam. Our Cabot Tides are now on the fence, as the broad market stopped rising about five weeks ago. Not surprisingly, many stocks and sectors have failed to make much progress over the past month and we’re beginning to see a few crack their uptrends.
We’re still giving our relatively strong, profitable stocks a chance to consolidate and eventually resume their uptrends. But there’s no question the near-term evidence has worsened, and so we advise being choosy on the buy side while tightening stops on losers and laggards.
With that in mind, we’re going to sell Exact Sciences (EXAS) tonight, which despite some early signs of leadership this year, stalled out for the past few weeks and imploded on huge volume today, apparently on some industry-wise reimbursement fears. It could bounce, but the action of the past few weeks, combined with today’s breakdown, prompts us to cut our loss tonight.
The sale of EXAS will leave us with around 18% in cash, and we have a couple other names (such as CIEN and possibly FIVE depending on its post-earnings action in the days ahead) that are on tight leashes. A couple of days of strength would go a long way toward clearing the market’s air, but until that happens, we’re content to hold the cash and watch our remaining stocks closely.
Your next scheduled message is tomorrow, Thursday (March 28), when we’ll be sending the next issue of Cabot Growth Investor.