It’s been a highly divergent week in the market—everything started the week lower, but some positive mega-cap earnings have brought the Nasdaq and S&P 500 back to even-ish for the week. However, the action is far, far worse under the hood, with small- and mid-cap indexes down and, among growth-oriented stocks, many more air pockets emerging (including lots of poor earnings reactions).
All in all, to us, the evidence definitely has worsened in the past couple of weeks as a whole, with more indexes returning to their lows, financial stocks (especially commercial banks, which are the center of the financial storm) tagging new lows and the broad market taking a hit.
With that said, has the action been enough to conclude the on-again, off-again environment is over and we’re headed lower? No, we can’t say that, either, as most indexes remain in wide ranges and, while there have been some blowups among potential leaders (MBLY, PI were two this week, while cybersecurity names got hit as well), many have taken this week’s volatility mostly in stride as they head into their own earnings reports next week.
Said another way: A good couple of weeks with lots of positive earnings gaps would still change the market’s outlook in a hurry, so we’re remaining flexible and keeping our eyes peeled. We could envision a scenario where, given the widespread pessimism and many setups still out there, the market’s early-week selloff (after testing the high end of the trading range) was a shakeout that leads to a rush of buying and breakouts from here.
That said, we have to see that first, and in the meantime, the damage among high relative strength stocks and the broad market keeps us in a cautious stance. We’ll likely bring our Market Monitor down another notch to a level 4 come Monday, though we’ll see how things go between now and then.
BUY IDEAS
Chip stocks are getting hit, but Nvidia (NVDA) has been a cool customer of late, not just refusing to give back gains but trading very tightly over the past month as its moving averages catch up. We’re OK with a small position here and a stop in the mid-240s.
On Holding (ONON) has been choppy but hasn’t given up any of its massive post-earnings rally—in fact, shares nosed to new closing highs earlier this week. A nibble here or (preferably) on dips of a point or two would be tempting, with a stop around 27.
SUGGESTED SELLS
Partial Sells
If you haven’t taken partial profits in Wingstop (WING), we think doing so here makes sense—the stock has stretched higher with the help of Chipotle (CMG—positive earnings reaction) this week, but it has its own quarterly report next week and is bumping up into round-number resistance. Consider selling some but holding the rest.
Full Sells
Allegro Micro (ALGM) – decisive breakdown
Axcelis Technologies (ACLS) – tripped stop
First Solar (FSLR) – tripped stop
Impinj (PI) – imploded on earnings
Palo Alto Networks (PANW) – tripped stop
Pinterest (PINS) – tripped stop
Royal Gold (RGLD) – no bounce after sharp, high-volume drop
Sea Ltd. (SE) – break of 50-day line and give-up of entire recent move
SUGGESTED STOPS
10x Genomics (TXG) near 48.5
Academy Sports (ASO) near 57
Boeing (BA) near 194
DraftKings (DKNG) near 19.4
Five Below (FIVE) near 192
Freeport McMoRan (FCX) near 36
HubSpot (HUBS) near 390
KB Home (KBH) near 38.5
Lennar (LEN) near 103.5
Omnicom (OMC) near 87
Penumbra (PEN) near 262
Rambus (RMBS) near 43
Samsara (IOT) near 17.5
Spotify (SPOT) near 125
