The market was on edge last week and reached a tipping point yesterday on concerns that the 10-year yield has broken well above 3% and could move higher still if the Fed continues to tighten (as it has signaled it will).
On the one hand it felt like there could have been some capitulation yesterday, and the market did battle back some late in the afternoon. On the other hand, it could also be that interest rates are just going too high, too quickly and a sustained rotation out of growth-oriented assets and into value-oriented assets is underway.
In any event, the evidence in front of us suggests we need to become incrementally more defensive. That means avoiding losses and protecting gains.
Specifically, today we’re stepping out of the way of one stock that’s back near breakeven for us and taking partial profits in three stocks that have delivered market-beating gains but are succumbing to growth stock weakness.
Apptio (APTI): Apptio broke below my suggested mental stop loss level of 32.5 yesterday and is on the verge of moving below its 200-day line. We have a gain of over 40% and I suggest taking partial profits here. We’ll consider buying back in if and when the trend improves. SELL HALF, KEEP HALF.
Instructure (INST): Instructure broke below 32 yesterday, which is a level of support dating back to last year. We now have a small loss and it’s time to move on. The company will report earnings on October 29, and that event could turn things around. But given the trend right now, the lower risk play is to step out of the way and move back in if the quarterly report and forward guidance are well received, and if the stock’s trend improves. SELL.
Q2 Holdings (QTWO): Q2 broke below my suggested mental stop loss level of 54 yesterday. We have a gain of around 115% and, like Apptio, may buy back in if and when the trend improves. Right now the chart is telling us to take steps to protect our gain. I already suggested selling part of your position last year. Today I suggest selling another chunk. For tracking purposes I’ll track this sale as a quarter position, which leaves the portfolio with a quarter position remaining. SELL A QUARTER, KEEP A QUARTER.
AxoGen (AXGN): Independent of the market, AxoGen looks like it could be approaching a decent entry point. But, of course, we can’t ignore that we’re in a risk-off market environment. We have a gain of around 115% and a critical upcoming earnings release (the date hasn’t yet been announced). As I’ve stated several times over the last month, I believe that earnings report should go well, but just in case let’s take partial profits to protect our current gain. SELL HALF, HOLD HALF.