From a top-down perspective, it’s been a very encouraging week for the market: Not only are the major indexes sitting on solid gains coming into Friday morning, but many are testing key levels on the upside—the Nasdaq is toying with its 40-week line/200-day moving average, while small- and mid-cap measures are right at their December highs.
Meanwhile, all of the broad market good tidings are still in effect (the number of stocks hitting new lows remains tame while the advance-decline lines are still ripping higher), and we like how a couple of selling raids of late have been quickly overcome.
Thus, we’re encouraged—though we don’t want to pretend like there aren’t still headwinds out there. Besides things like the longer-term trend (still down) and attempted breakouts (still iffy), even some of the factors mentioned above (such as testing the high end of the two-month range) are good to see, but not definitive. (In our view, the intermediate-term trend is still basically sideways.)
All in all, we’re still very much in a trust-but-verify mode, which I talked about a lot in my webinar last week: For the first time in forever, we’re seeing some legitimate positive signs from the market itself, now it’s a matter of continuing to build on it. In our view, earnings season will be vital, as there isn’t much true leadership in the rally, though that’s not unusual given that the market just changed character in a good way at the start of the year.
We’ll see how it goes today and Monday, but as it stands now, we’re leaning toward nudging up our Market Monitor a notch (to a level 6) given the slow, steady improvements seen out there.
BUY IDEAS
Reliance Steel (RS) still has earnings coming out (on February 16), but the steel group has gotten legs after some bullish quarterly results from peers. It’s not a super-fast mover, but we’re OK buying a bit (either new stake or adding a bit to your position) on this breakout or on dips of a few points, with a stop in the 200-205 area.
Schlumberger (SLB) and some other oil service names have been a bit sloppy after earnings, but it didn’t breach any key levels and is still in good shape, both chart-wise and fundamentally. Sure, maybe SLB cracks, but we think it’s a solid risk-reward situation here—we’re not opposed to entering on this exhale if you didn’t buy a couple of weeks ago, with a stop in the lower 50s.
SUGGESTED SELLS
Partial sale: We love the action from United Rentals (URI), with a big earnings move this week—but we might take a chunk off the table up here and hold the rest with a trailing stop.
Outright sells: None right now, though we’ll likely prune a couple of names come Monday, as some have stagnated even with the market’s improvement.
SUGGESTED STOPS
Academy Sports (ASO) near 47.5
Akero Therapeutics (AKRO) near 44
Array Technologies (ARRY) near 20
Atkore (ATKR) near 115
Axon Enterprises (AXON) near 164
Berry Plastics (BERY) near 57.5
Celsius (CELH) near 95
Ciena (CIEN) near 48
Five Below (FIVE) near 169
Impinj (PI) near 113
JD.com (JD) near 55
Planet Fitness (PLNT) near 76
Reliance Steel (RS) near 202
United Rentals (URI) near 375
Univar (UNVR) near 31
