It started as a relatively quiet week as summer gets going and Wednesday was off. But the past two days have brought a good-sized rotation, with a lot of elevated, strong names deflating in a hurry even as the major indexes don’t move too much.
From a top-down perspective, not much has changed with the evidence—the intermediate-term trend for most stocks, sectors and indexes is neutral; essentially, the correction/consolidation that started in March is still in place for most of the market. Meanwhile, the big-cap indexes are in firm uptrends, creating a good-sized near-term divergence.
As we’ve written before, that divergence raises risk of a change in character, with some violent rotation or a general selloff—and it’s possible we’re starting to see that now among individual names, many of which have been hit very hard the past two days (Thursday and today).
Now, to be fair, some sort of air pocket was increasingly likely given how extended most strong stocks were, and at this point we haven’t seen a ton of abnormal action, with few 50-day line breaks of huge, outsized declines on big volume. So it’s certainly possible this is another shakeout that will lead to some support.
Right now, we’re leaving our Market Monitor at a level 7, but it’s really a stock-by-stock situation—trimming names that are weak, holding names that are retreating normally and even doing some buying near support (with stops, of course). If this rotation runs wild, we’ll change our tune, but we think individual stocks will tell the tale in the days ahead.
SUGGESTED BUYS
It hasn’t moved since we recommended it near the start of the month, but Freshpet (FRPT) remains cool, calm and collected as its 50-day line (now near 120) catches up. You could start a position here and consider adding on a thrust above 133—using a stop near 120, making for a good risk-reward situation.
Robinhood (HOOD) is very volatile, but it’s pulled back five straight days on very low trade and is finding some support at its 25-day line. We’re game for starting a position here with a stop near the 50-day line (call it 19.5 or so).
SUGGESTED SELLS
Partial Sells
None this week
Full Sells
Impinj (PI) – bad gap earlier this month and no real bounce
Itron (ITRI) – tight setup failed on big volume this week
PDD Holdings (PDD) – tripped stop; not awful, near prior lows, but just languishing since late May
Tandem Diabetes (TNDM) – tripped stop. Overall, the very strong to very weak pattern doesn’t likely bode well
SUGGESTED STOPS
Analog Devices (ADI) near 220
Carpenter Tech (CRS) near 95
Carvana (CVNA) near 101
Dutch Bros. (BROS) near 34.5
Fabrinet (FN) near 227
Flex Ltd. (FLEX) near 29.5
Freshpet (FRPT) near 119
GE Verona (GEV) near 161
Howmet Aerospace (HWM) near 76
Johnson Controls (JCI) near 67.5
Natera (NTRA) near 98.5
Onto Innovation (ONTO) near 207
Pulte Group (PHM) near 108
Robinhood (HOOD) near 19.5
Sweetgreen (SG) near 28
Taiwan Semi (TSM) near 153
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