WHAT TO DO NOW: Continue to step lightly. The overall market is still positive, but it’s clear that the buyers aren’t in firm control—the environment is news driven and rotational, with few stocks hitting new highs. Moreover, today saw another round of heavy growth stock selling. We have no new buys or sells tonight, but are moving Carvana (CVNA) to Hold and keeping it on a very tight leash. Overall, the Model Portfolio is around 35% in cash and we continue to advise being choosy on the buy side and keeping any new positions small. Details below.
The market took a hit today, with the Dow losing 140 points and the Nasdaq diving 119 points. But more important to us was the big blows seen in most growth stocks, including many of this year’s winners, which suffered another leg down.
From a top-down perspective, the overall market remains in acceptable shape—the intermediate- and longer-term trends are still pointed up and the broad market remains healthy. Until proven otherwise, then, this is still a bull market that’s likely to see upside down the road.
But when it comes to individual growth stocks, the going has been tough. Even before today’s selloff, it’s been very hit or miss, with many stocks hitting potholes and those that enjoy a few good days generally giving up those gains rather quickly. Simply put, no real money is being made.
Because of the environment, we’ve been selling stocks that broke down (thankfully exiting most of the highfliers a while ago) and going slow on the buy side, adding some half positions but keeping plenty of cash on the sideline (now around 35% of the portfolio). Many of our positions are holding up decently, though some of our names are hitting air pockets with other growth stocks.
As an aside, it’s possible quarter-end is exacerbating the selling—late September is historically bad for the market—and the “new” rumors and reports of impeachment proceedings probably aren’t helping. But we’re not going to hang our hat on the calendar or politics; instead we’re going with what we see.
Tonight, we’re placing Carvana (CVNA) on Hold and keeping it (and some others) on tight leashes. Here’s a quick rundown on the Model Portfolio names.
BX: Pulling back normally to this point after a solid advance. We’re OK buying some here or on dips of another point or so. BUY.
CMG: The stock’s comeback from last week’s sharp drop has been impressive, with lots of big-volume buying days. It will probably pulls back given the environment, but it looks like it wants to go higher if the market’s crosscurrents subside. HOLD.
COUP: Impressed with the stock’s resilience given the meltdown in other cloud software names. That said, a sustained upmove is unlikely until the sector find its footing. Mental stop in the mid 120s. HOLD.
CVNA: CVNA is our name that’s closest to being cut. The stock’s been steadily losing ground and today’s puke was discouraging to say the least. We have a mental stop just below here (68 to 69 area), which is right near some price and prior volume support. We’ll hold tonight, but it needs to find support right around here for us to stick around with our half position. HOLD.
DOCU: Got whacked today, which is never fun, but is just back to where it was a few days ago. If the selling continues we could go to Hold, but right here it looks like a buyable shakeout (albeit for a half-sized position). BUY A HALF.
IPHI: Has taken a good-sized hit so far this week, though it’s still within its recent range. We’re holding with a mental stop in the 54 area. HOLD.
SSO: The Tides Buy signal is still intact, though the next few days will be telling. Until proven otherwise, the trends of the major indexes are up. BUY.
SNAP: SNAP approached new highs today but reversed with the horrid market. Like many names, it looks like it wants to get moving if the environment improves. HOLD.
TDOC: Our new half position (added last Friday) fell with everything else today, but given the stock’s recent advance, the damage was reasonable. We’re still OK picking up a small position if you’re not yet in. BUY A HALF.