It’s been a great week for the major indexes—Monday did most of the heavy lifting, of course, with the market surging after the U.S. and China announced a trade truce of sorts, but the market has built on those gains since. Coming into today, most major indexes were up in the 3.5% to 5% range, with the Nasdaq doing even better.
In terms of the intermediate-term evidence, it continues to improve—the intermediate-term trend turned up a week ago and obviously got a boost this week, while our Aggression Index (compares the growth-y Nasdaq to the defensive consumer staples) has also turned up and the broad market has returned to health.
The bugaboo in the evidence remains among individual stocks, where very few of them are hitting new highs and, more importantly, many of the resilient names of the past two months have actually fallen apart. Instead, most of the action has been in beaten-down stocks, which is fine but could eventually cause problems as those names run into resistance (which few other names have been able to surpass).
Now, with that said, we don’t view this as bearish, but more descriptive of the environment. Indeed, this sort of thing is often seen in the initial phases of the rally, and we have seen some improvement in the past week, with some key earnings-induced breakouts. We’ll want to see more “real” breakouts going ahead.
All told, though, we’re optimistic—some near-term indigestion is possible given the big rally of late and that a lot of good news has come out (rumors of renewed trade tensions could bring in some profit taking), but the overall setup, including the panic selling, negative sentiment, Three Day Thrust and now most intermediate-term evidence turning up bodes well.
We wouldn’t be cannonballing into the pool here, but we continue to extend our line—we’ll bump up our Market Monitor to a level 7 and will look to latch onto more leadership as it gets going.
SUGGESTED BUYS
CrowdStrike (CRWD) is part of the strong cybersecurity group, and it’s set up a nice launching pad, with some rest over the past two weeks. It does have earnings soon-ish (June 3), but we’re OK with a nibble here and a stop in the upper 380s, and possibly averaging up if we see a decisive move above 450 down the road.
SUGGESTED SELLS
Partial Sells
On one hand, Exelixis (EXEL) looks great, blasting to new highs on heavy volume this week—but the biotech/medical group is very weak, so if you bought with us a couple of weeks ago, you can consider shaving off some shares on strength and using a stop near your cost for the rest.
We think Mosaic (MOS) could go far if this turnaround is for real, but if you bought less than two weeks ago on the initial earnings shakeout, we’re OK letting a few shares go up here and holding the rest.
Same with Sea Ltd (SE) – again, we like the action, but if you have a quick profit, it’s OK to put some profit in your pocket and hold the rest.
Full Sells
ADMA Biologics (ADMA) – tripped stop after earnings, and as part of the horrid medical group
Agnico Eagle Mines (AEM) – decisive breakdown earlier this week on the trade truce
Loar Holdings (LOAR) – yet another name that was acting well for weeks but has been punished on earnings
Penumbra (PEN) – not the worst chart, but it couldn’t get through round-number resistance near 300 even after a strong earnings reaction, and now it’s falling off.
SUGGESTED STOPS
CrowdStrike (CRWD) near 387
Exelixis (EXEL) near 39.5
Expand Energy (EXE) near 103.5
Fortinet (FTNT) near 95
Insulet (PODD) near 268
Marex (MRX) near 43
Nutrien (NTR) near 53
ServiceTitan (TTAN) near 110
Take-Two Interactive (TTWO) near 199
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