As has been the case for months, the sellers stepped up this week once the major indexes approached resistance (generally in the area of the early December highs), leaving them in the red—coming into today, most were down in the 2% to 3% range on the week.
Obviously, this week was a downer and didn’t advance the bullish cause, but nothing has really changed to this point—the broad market green shoots from a week ago are still in place (yesterday saw 18 new lows on the NYSE, still very tame) and so far most of the weakness has been in stocks that recently ramped and are giving up some of their recent gains.
That’s not good (selling on strength remains one of the market’s key bugaboos), but we didn’t see many stocks break down through support, be them weaker names (cracking December lows, etc.) or strong names (50-day lines). Plus, we find it interesting that the downside leaders this week were defensive areas—consumer staples (XLP) and utilities (XLU) both came into today down 3.5%. That’s not the be-all of analysis, but it’s something to watch and isn’t the worst sign.
Net-net, nothing has really changed—the intermediate-term trend is mostly sideways and selling on strength is still evident, but the broad market positives of late haven’t been erased and we can’t say individual stocks were a horror show, either. Frankly, if the market can hold here and ramp next week, we think there could be some great opportunities.
Right now, though, we’ll stay cautious, leaving our Market Monitor at a level 5 as we see how this retreat plays out.
BUY IDEAS
CNH Industrial (CNHI) isn’t a moon shot, but it’s been acting fine, holding its 25-day line near year-end before pushing to new highs this year. The latest dip looks reasonable, so if you want in, we’re fine nibbling here with a stop in the 15.5 range.
Five Below (FIVE) ramped to new price highs on good volume to start the year and is now pulling in on very light trade, partly as retail stocks fade. That said, we see a decent risk-reward setting up—we’re OK starting a position here or on dips with a stop near 166.
SUGGESTED SELLS
Outright sells: TechnipFTI (FTI) – it looks OK and there’s nothing wrong with trailing a stop, but shares are having issues with their December highs and have lost some power.
Pinduoduo (PDD): Again, looks OK, but the 100 level is a barrier and the China theme is short-term obvious—we’ll take a small profit.
SUGGESTED STOPS
Academy Sports (ASO) near 47.5
Akero Therapeutics (AKRO) near 44
Atkore (ATKR) near 112
Axon Enterprises (AXON) near 160
Berry Plastics (BERY) near 57
Catalyst Pharmaceuticals (CPRX) near 17.5
Celsius (CELH) near 95
CNH Industrial (CNHI) near 15.5
Emcor (EME) near 143
Five Below (FIVE) near 166
Impinj (PI) near 112
JD.com (JD) near 54
Planet Fitness (PLNT) near 75
United Rentals (URI) near 351
Univar (UNVR) near 30.5
