Net-net, it’s been a quiet week for the major indexes, with most up or down less than 1%. That said, there are some interesting things happening under the market’s surface.
The good news is that when you examine the primary evidence—the trends of the major indexes and action of leading stocks—most everything continues to point to the upside. In fact, the strong snapback seen last week in most leading titles has followed through this week, with many names rallying further or hitting new highs, and many of those that haven’t trading in tight, calm ranges for the past four weeks (possibly setting up higher-odds entry points). That’s enough for us to remain overall bullish.
That said, we’re not leaving our brain at the door, either. There’s no question that the broad market has been taking lumps and things have been thinning out—yesterday, as the Nasdaq came close to new high ground, fewer than 100 stocks hit virgin turf, compared to north of 400 a month ago when the Nasdaq was at similar levels.
Moreover, so far this month, we’re seeing some eye-opening weakness in certain areas—the Ark Fund (ARKK) is down nearly 13% this month (!), while the Renaissance IPO Fund (IPO) is off more than 9%. All in all, our Top Ten list is split like the market, with many names weakening alongside a bunch that remain peppy.
To be fair, some of this can be chalked up to the January effect—lots of crosscurrents and wild moves are the norm. In fact, it wouldn’t shock us to see another bout of rotation, where the broad market possibly picks up, especially as earnings season revs up.
All that said, we like to just go with what we see—and right now, we see a market where most of the important evidence is positive, though it’s also showing signs of wear and tear under the hood. Because of that, we like our stance: We’ll again leave our Market Monitor at a level 7, aiming to hold all (or most of) our strong positions, but also picking our spots with new buys, including buying mostly on dips, while ditching names that are lagging.
POTENTIAL BUYS
GitLab (GTLB) has spent four weeks consolidating its big post-earnings move in December, but this week it’s showing signs of wanting to get moving, with the stock and RP line returning to their prior highs. We’re OK with a small buy here or (preferably) on dips of a couple of points, with a stop in the 57.5 range.
SUGGESTED SELLS
Partial Sells
Nutanix (NTNX) looks great, zooming to new highs in recent days on a spate of positive news (M&A rumors, upgrades, etc.). The action is a definite plus, but near-term, the stock is extended in both price (50-day line is under 45) and time (been running 2.5 months with no corrections longer than two days!)—we think booking a little partial profit here makes sense.
Full Sells
Birkenstock (BIRK) – got stopped out after earnings yesterday
Duolingo (DUOL) – two big wallops this week—if you want to sell some/hold some that’s OK, but for Top Ten we’ll exit the position
Micron Technology (MU) – nice bump but chip stocks are going nuts and MU isn’t nearly as peppy as others
Snowflake (SNOW) – tripped stop
Workday (WDAY) – looks fine, but not super powerful, so we’ll book a modest profit on the way up.
SUGGESTED STOPS
Advanced Micro (AMD) near 135
Datadog (DDOG) near 112.5
Dave & Buster’s (PLAY) near 45.5
DoorDash (DASH) near 95.5
Freshworks (FRSH) near 20.5
Gap Inc. (GPS) near 18
Gitlab (GTLB) near 57.5
Intra-Cellular Therapies (ITCI) near 62
Martin Marietta (MLM) near 480
Nutanix (NTNX) near 41.5
Nvidia (NVDA) near 500
Pinterest (PINS) near 34
Royal Caribbean (RCL) near 116
Snap (SNAP) near 14.9
Spotify (SPOT) near 190
United Rentals (URI) near 525
Vertiv Holdings (VRT) near 46
