After weeks of ping-pong action, the sellers have finally taken control for the first time since last fall: The intermediate-term of the major indexes has turned down and the broad market has done the same, with more than two-thirds of all stocks now south of their 50-day lines. It’s the same when it comes to leaders—for weeks they had found support at key levels, but now most have cracked intermediate-term trend lines, including the key chip sector, which keeled over this week.
Because of the increasingly choppy, churning action that contained most areas (outside of commodity stocks) from late February to early April, we weren’t flooring the accelerator in recent weeks. And with the sellers stepping up, we’ve pared back further—we moved our Market Monitor to a level 6 in this week’s issue, and it’s possible we could drop it another notch come next week depending on how things go the rest of today and next Monday.
Now, looking ahead, we are seeing many oversold indicators (just in April, big-cap indexes are off nearly 5% and growth-oriented measures are off more), and if, say, the Middle East issues come to a halt, we’re not ruling out a quick snapback in the market; we’re all for it if that happens, and such a move could bring many opportunities given that so many stocks have actually been sitting around for the past couple of months.
Even so, following such a long advance and a recent breakdown, the odds favor some consolidation and/or more pain going ahead as stocks digest their moves and big investors reposition their portfolios and deal with the headline news (including interest rates).
Of course, earnings season is underway, and that can always change things in either direction, but right now we’re playing it cautiously: We advise limiting new buying, holding a good chunk of cash and getting rid of losers and laggards—though we’re OK holding winners (possibly after taking some partial profits) and nibbling on a resilient name or two here and there.
POTENTIAL BUYS
We continue to like some of the commodity stocks that are pulling back (their first dip since starting to move up two months ago). You could nibble on the dip … or you can look to buy on a resumption of the move. One example: SM Energy (SM) ran from 38 to 53 and has now shaken out to 48. You could buy a little here with a stop near 45—or wait for a move back above 49.5 to 50 before buying, with a stop near 46.
Another example: CNX Resources (CNX), which has held up even better (above its 25-day line)—we’re OK buying some here with a stop near 22, or you could wait for a move back above 24.5 or so (with a stop in the 22.4 range).
SUGGESTED SELLS
Partial Sells
None this week
Full Sells
The following names tripped their stop or violated their loss limits and were sold – most of them at decent profits:
Ascendis Pharmaceuticals (ASND)
ASML Inc. (ASML)
Arm Holdings (ARM)
AZEK (AZEK)
Freshpet (FRPT)
Hyatt (H)
Taiwan Semi (TSM)
Toll Brothers (TOL)
XPO Inc (XPO)
SUGGESTED STOPS
Atkore (ATKR) near 166
Axon Enterprise (AXON) near 292
Beacon Roofing (BECN) near 90
Cava Group (CAVA) near 56
Eli Lilly (LLY) near 730
Howmet Aerospace (HWM) near 61.5
KKR & Co (KKR) near 92
Kyrstal Biotech (KRYS) near 157
Medpace (MEDP) near 363
Natera (NTRA) near 82
Novo Nordisk (NVO) near 122
Nvidia (NVDA) near 775
Quanta (PWR) near 238
Robinhood (HOOD) near 15.9
Southern Copper (SCCO) near 100
Steel Dynamics (STLD) near 132.5
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