It remains very unusual times in the market, with a big rotation and then this week’s selloff that’s included most names, all on a bevy of news and rumors (chip sales restrictions to China, China/Taiwan tensions, a massive tech snafu this morning due to a CrowdStrike gaffe, etc.). We have many thoughts, and we’ll go through them point by point here.
First, just looking at the top-down evidence, despite all the topsy-turvy-ness, the market’s intermediate-term trend is up, with the broader indexes having kicked into gear late last week/early this week, and with the big-cap indexes having “only” pulled in to (or a bit below) their 25-day moving averages.
Second, to this point, the broad market surge has held pretty well—yes, there was some sloppiness the past couple of days, but so far, things like the NYSE Composite, S&P 400 (mid-caps) and S&P 600 (small caps) have given up “only” 20% to 35% of the prior five-day surge. Obviously, we’ve seen more than a few rug pulls when it comes to the broad market over the past year or two, but if these indexes can hold in the days ahead (obviously a big if), we do think the stage could be set for higher prices given how long they’ve been out of favor.
Third, however, when it comes to individual growth stocks, it’s been a very bad week: We’ve seen more breakdowns than we have in a long time, mostly due to the selling in tech/AI/chip plays, with numerous names tripping stops or breaking down. Indeed, the IBD 50 Index, which is a collection of high relative strength names with solid earnings growth, is off 5.4% for the week coming into today.
To be fair, it’s not 2022 out there; many names are “only” down to 50-day lines and other areas are holding well. And with earnings season revving up, we’re not ruling out some fresh leadership emerging (or some battered names bouncing back).
Even so, given the breakdowns, we’ll pull our Market Monitor down to a level 6, though once again, it’s really a stock-by-stock situation—if you’re in some names acting well or trying to emerge, we’d give them a chance and some select buying is fine by us, but it’s important to cut losses and honor stops as more and more names fall by the wayside.
SUGGESTED BUYS
We can’t say it’s at a great entry point, but we wanted to flag Cirrus Logic (CRUS), a chip stock that has completely bucked the sector’s trend this week, actually finding good-volume support yesterday while so many names were hit. The 25-day line is near 132 and rising quickly, and a meetup with that would be tempting.
Guidewire (GWRE) has been a cool customer this week, with minor moves as the stock holds above its 25-day line. Of course, software stocks aren’t super strong as a group, but in terms of risk-reward, we’re OK snapping up some shares here or on dips with a stop near the 50-day line (near 130).
Halozyme (HALO) continues to look like a possible beneficiary of the market’s rotation, moving to new highs on good volume earlier this week before backing off a bit on low volume the past two days. We’re OK nibbling here or (preferably) on dips of a point or two with a stop in the 47 to 48 range.
SUGGESTED SELLS
Partial Sells
It depends on your positioning, but without getting into all the details, CrowdStrike (CRWD) has a massive snafu overnight that’s wreaking havoc on many systems in the real world—and is nailing the stock. It’s a highly unusual situation, but if you have a reasonably-sized stake and a big profit, we’d favor selling some here and holding the rest for now as we see if the stock can find support near the 200-day line (290 or so).
Full Sells
ASML Inc (ASML) – cracked on earnings and the chip weakness
Broadcom (AVGO) – tripped stop
Datadog (DDOG) – tripped stop
Dutch Bros. (BROS) – went from near new highs to tripping our stop in two days. If you still own it, you can consider using a stop in the 37 area as the stock did close well yesterday.
Natera (NTRA) – after lots of churning, the stock finally cracked 50-day line and our stop.
Onto Innovation (ONTO) – cracked 50-day line and our stop
Sarepta Therapeutics (SRPT) – tripped stop
Taiwan Semi (TSM) – tripped stop, though it did bounce off the 50-day line. If you’re holding it, you can consider a stop at 164.
Uber (UBER) – the low-level breakout attempt failed badly this week.
SUGGESTED STOPS
Arista Networks (ANET) near 324
Blueprint Medicines (BPMC) near 105
Burlington Stores (BURL) near 233
Carpenter Tech (CRS) near 103
Credo Tech (CRDO) near 27.5
CyberArk (CYBR) near 253
Guardant Health (GH) near 27.5
HP Enterprise (HPE) near 20.2
Hims & Hers Health (HIMS) near 18.9
Howmet Aerospace (HWM) near 77
Light & Wonder (LNW) near 98.5
Monday.com (MNDY) near 220
Robinhood (HOOD) near 20.2
Seagate Tech (STX) near 99.5
SharkNinja (SN) near 70.5
Trade Desk (TTD) near 94
