It’s been a volatile week for the indexes with a slight upward bent—most indexes are up in the 1% range as of this morning.
Not surprisingly, being more than four months into an intermediate-term advance, it’s becoming a bit more of a stock-by-stock situation among the leaders. Chip stocks, for instance, remain mostly firm (though the best are very extended to the upside), but other names that have been running for three to four months are seeing more than a little churning—up-down-up-down action without much price progress for the past month. We’re seeing similar action in our Aggression Index (Nasdaq vs. consumer staples).
To be fair, these names have generally had big runs, so some distribution was going to happen at some point. And so far, few big leaders have cracked intermediate-term support, so it’s hardly the end of days. But there’s no doubt we’re seeing buying dry up/selling appear in some extended names.
The good news is that, starting a couple of weeks ago, we’re seeing more than a few “fresher” names emerge. Some of these are newer names that are gapping on earnings, while others may have been resting for much of this year before resuming their post-October 2023 upmoves.
When you combine all of that with the still-positive market trends, we’re (a) keeping our Market Monitor at level 7 yet again, (b) are making sure we have stops in for extended leaders in case the sellers gain strength, but (c), on the buy side, focusing mostly on fresher names that likely have more upside if the market continues to crank ahead—and may hold better should the market finally pull in.
POTENTIAL BUYS
After big runs in November and early December, most homebuilders basically went straight sideways for a couple of months and are now beginning to emerge on the upside—Toll Brothers (TOL) is the strongest right now, but Lennar (LEN) and Pulte (PHM) are also acting well. Any of them look buyable, albeit with a reasonable loss limit (10% or so).
SUGGESTED SELLS
Partial Sells
Nvidia (NVDA) is obviously a big dog among leading stocks, but after rising 90% from its breakout in January, gapping up four times in the past five days, trading more than 40% above its 50-day line and approaching round number resistance at 1,000, we think taking a few chips off the table makes sense up here.
Full Sells
Burlington Stores (BURL) – Looks fine with a small pop after earnings, but nothing amazing and it’s giving back some ground today. We’ll sell and take the small gain.
Elastic (ESTC) – We advised taking some off last week, and the stock’s downside follow through has us selling the rest.
Lam Research (LRCX) – We normally don’t trade this quickly, as we just wrote the stock up on February 26, but chip stocks are very extended and I wouldn’t say LRCX is the biggest leader … and it’s knocking up against resistance at 1,000. We’ll take the quick, modest profit.
Wynn Resorts (WYNN) – Tripped our stop as the earnings pop ran into selling.
SUGGESTED STOPS
Academy Sports (ASO) near 66
AppFolio (APPF) near 218
Ascendis Pharmaceuticals (ASND) near 139
Automatic Data Processing (ADP) near 238
Axon Enterprise (AXON) near 273
Cava Group (CAVA) near 50
Dell Technologies (DELL) near 104
Freshpet (FRPT) near 95
Lennar (LEN) near 151
Interactive Brokers (IBKR) near 97
Natera (NTRA) near 73
Nextracker (NXT) near 52
Nvidia (NVDA) near 670
Taiwan Semi (TSM) near 122
Toll Brothers (TOL) near 106
United Rentals (URI) near 612
XPO Inc (XPO) near 107.5
