Just a reminder that our offices will be closed with everyone else’s on Memorial Day, so your next Top Ten issue will be emailed and posted to cabotwealth.com after the close on Tuesday, May 28. Have a fantastic long weekend!
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After a few constructive weeks in the market, this one was a bit of a bummer, with the selling pressures picking up in some key names—and the broad market. As of this morning, the big-cap indexes are up or down a smidge on the week, though broader indexes (small- and mid-caps, NYSE Composite) were off 2% or so.
All in all, the evidence remains positive, but the few days of stalling near the recent highs and yesterday’s selling wave sets up a couple of things to watch after the holiday.
First off, when it comes to the major indexes, those broader measures have all quickly dipped back to their 50-day lines after being rejected at their prior spring highs. Of course, they’re all still well above their recent (April) lows, but a break of support would (at the very least) tell you most of the market is stuck in a trading range. We’d also note that the number of stocks hitting new lows (one of our favorite measures of broad selling pressures) has started to pick up again, though it’s only been a couple of days so far.
We would point out that, when looking at the indexes and sub-groups, the growthier stuff held up better this week. Obviously, some of that is the Nvidia action and its effects on things like chips, but overall, it’s a check in the positive column.
Then there are individual stocks, which are mixed—many look totally fine, with some continuing to move ahead in recent days or pulling back grudgingly. That said, we have seen more air pockets of late (commodity stocks took hits) and a bunch of stocks and sectors look similar to the broader indexes, meaning a rally back into resistance and then some hesitation.
Now, stepping back, one wobbly week after four constructive ones is not the end of the world. Thus, our point isn’t so much that this week was a major yellow flag, but more that much of the market is still in the process of coming out of the March/April correction, so the action (indexes, leading stocks) needs to be watched carefully.
As always, we advise flexibility, not just in your outlook but in how you handle your portfolio—aiming to pare back or sell names that are lagging and cracking (as well as taking partial profits in names that pop), while focusing new buying on stocks showing some power.
All in all, we’re leaving our Market Monitor at a level 8, though we’ll tweak that if need be.
POTENTIAL BUYS
ATI Inc. (ATI) has meandered this month, but it’s traded relatively tightly and this comes after a moonshot reaction to earnings at the end of April. If you don’t own any, we’re OK with a small buy here and a stop near the 50-day line just under 54.
SUGGESTED SELLS
Partial Sells
Celestica (CLS)—it depends exactly where you bought it, but CLS broke out nicely eight trading days ago and has run more than 10% quickly. You can consider letting a few shares go for a quick profit and trail a stop for the rest.
DraftKings (DKNG) has been a long-time holding, but the past few months have been OK and choppy at best and now shares are taking on water, retesting their April lows. We advise paring back and using a tight stop for the rest.
It’s a similar story with Uber (UBER), which is near longer-term support but is clearly lagging most stuff out there right now.
First Solar (FSLR) broke through round-number resistance at 200 and went bananas during the next couple of days. Go ahead and ring the register on some quick 25% to 30% gains and hold the rest to see if a longer-term move can develop.
Full Sells
Chord Energy (CHRD) – elevated selling after rally attempt and the stock is flirting with the 50-day line
Diamondback Energy (FANG) – tripped stop
Viking Therapeutics (VKTX) – tripped stop.
SUGGESTED STOPS
Agnico Eagle (AEM) near 62
Alphabet (GOOGL) near 162
Antero Resources (AR) near 31
ATI Inc. (ATI) near 53.5
Boot Barn (BOOT) near 103
Cava Group (CAVA) near 60
Celestica (CLS) near 47.5
CNX Resources (CNX) near 23.5
Chord Energy (CHRD) near 175
Core & Main (CNM) near 55
Howmet Aerospace (HWM) near 72.5
KKR & Co (KKR) near 97
Natera (NTRA) near 92
Southern Copper (SCCO) near 110
Sweetgreen (SG) near 26
Tidewater (TDW) near 95.5
Tri Pointe Homes (TPH) near 36
Vertiv Holdings (VRT) near 89
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