It’s been a poor week for the market, with the big-cap indexes down in the 2% range coming into today, and broader indexes like small and mid-caps are off more, with growth stocks also lagging.
After a lot of churning from early/mid-February into late March, the market enjoyed a nice post-Fed rally that looked ready to kick many names higher—but from today’s perspective, that rally looks to be failing, with many leaders that poked their heads up smacked right back down.
When looking at the negatives (or at least, the not-positives), many growth leaders have now been basically chopping sideways for a month or two after big runs, with more and more testing key intermediate-term levels after repeatedly being rejected on rally attempts. (We see this in the Nasdaq itself, which is flat over the past two months and is close to its 50-day line.) When you combine that with the recent extended run and elevated sentiment by many measures, the risk of a change in the market’s character is real.
That said, on the more encouraging side of things, we’re still not seeing any rash of breakdowns (below 50-day lines, etc.) among leaders or indexes for that matter. Moreover, most of what we’re talking about here concerns the technology and other stocks that got going late last year.
To be fair, we’re still not seeing a rash of breakdowns (below 50-day lines), and the sour action mostly surrounds stocks and sectors that got going last November; fresher situations are in better shape for now (coming down, but nothing abnormal), and many Old World areas (commodities, industrials, etc.) look fine thanks to the rotation we wrote about last week.
Put it together and we’re still taking things on a stock-by-stock basis, honoring our stops and holding a little cash—while focusing any new buying on strong situations. We’re going to pull our Market Monitor down to a level 7 and will remain flexible: Much selling from here could have us turning intermediate-term cautious, though we would say that a sharp upturn that actually followed through (possibly brought on by a renewed dip in rates) would still be enticing.
For now, pull in your horns a bit and make sure you have a plan in place for all your stocks—we’re thinking the market and many names are at or approaching key junctures.
POTENTIAL BUYS
Axon Enterprises (AXON) has taken all the ups and downs of the market and leading stocks in stride, with a calm and relatively tight five-week range since earnings. Yes, the stock can move in a hurry, but with the 50-day line approaching, a nibble here or on dips and a stop in the 285-290 range is a decent risk/reward.
Robinhood (HOOD) has pulled in sharply this week, but this comes after a huge run—it’s only down to its 25-day line this morning. It’s aggressive, but a small position here or on a bit more weakness and a loose stop (15.5 to 16) near the 50-day line is an idea.
SUGGESTED SELLS
Partial Sells
It’s not a giant profit, but if you bought Diamondback Energy (FANG) with us, we think shaving off a few shares after this very persistent run makes sense, while giving the rest of your position room to breathe.
Full Sells
Block (SQ) – like so many things of late, the breakout failed and shares have sunk back into their base
Nextracker (NXT) – tripped stop and key support
On Holding (ONON) – breakout attempt failed; there is some support near here but the overall pattern looks weak
Palantir (PLTR) – tripped stop earlier this week
Samsara (IOT) – yet another failed earnings pop
Tapestry (TPR) – very nice, tight setup quickly went up in smoke on big volume with the market. We’ll cut the loss quickly.
SUGGESTED STOPS
Apollo Group (APO) near 107
Ascendis Pharmaceuticals (ASND) near 142
ASML Inc. (ASML) near 924
Axon Enterprise (AXON) near 286
AZEK (AZEK) near 45
Cava Group (CAVA) near 54.5
Celsius (CELH) near 76
Eli Lilly (LLY) near 727
Freshpet (FRPT) near 104
Hims & Hers Health (HIMS) near 13.4
Hyatt (H) near 150
Light & Wonder (LNW) near 95
Natera (NTRA) near 81
Novo Nordisk (NVO) near 121.5
Nvidia (NVDA) near 765
Pure Storage (PSTG) near 49.5
Sterling Infrastructure (STRL) near 100
Taiwan Semi (TSM) near 130
Texas Roadhouse (TXRH) near 141
Toll Brothers (TOL) near 113
United Rentals (URI) near 654
XPO Inc (XPO) near 113
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