It’s been a fairly quiet few days for the major indexes, with most down less than 1% on the week after the recent sharp recovery, which seems normal enough.
More important to us is that our intermediate-term trend model (called Cabot Tides) has turned positive today—essentially, after a decline like we saw, a green light happens when most major indexes are above where they were five weeks ago (the 25-day moving average starts to trend up). That’s happening today, as five weeks ago was the early-April crash, and of course the indexes have had a good rally of late.
The Tides buy signal adds to the increasingly encouraging top-down evidence, starting with the legitimate panic selling seen at the lows (north of 1,000 new lows on the NYSE/Nasdaq, etc.) that spurred major pessimism (which could be seen from surveys, real-money measures and anecdotal factors like magazine covers), followed by some signs of rare strength (like our Three Day Thrust) that bode well when looking months down the road. All of that is to the good.
However, the holdup right now comes from the bottom-up view—individual stocks have certainly been improving, but there’s still a lot of repair work going on, with very few names hitting new highs. And probably more important to us, there have been many names that held up well throughout the market’s implosion and tested prior highs recently … before being soundly rejected, often on earnings. Said another way, we’re still seeing a fair amount of selling on strength out there.
To be clear, after a 27% gutting in the Nasdaq where many growth names fell even more, some selling after the recent recovery isn’t necessarily abnormal; in many cases, the stocks could simply need a bit more seasoning before decisively reaching new highs. But until we see more leadership develop and break out, the situation will be trickier, with stocks often being repelled by resistance or subject to potholes.
Put it all together and we’re not ignoring the Tides green light, but with leadership still in the nascent stages, we’re also content to go slow—we’re OK extending your line a bit in stronger names, but hold some cash and be sure to trail stops in case things turn. We’ll nudge our Market Monitor up to a level 6 today.
SUGGESTED BUYS
Uber (UBER) had a great run into its old highs and has wobbled a bit after earnings this week—but it looks fine to us, and we think starting a position in the 80 to 82 area, with a stop a bit below the 50-day line (call it 74 or so), is a reasonable risk-reward situation.
SUGGESTED SELLS
Partial Sells
We like the look of Howmet Aerospace (HWM) overall, but with the stock straight up from 120 during the past month, we’re OK taking a few chips off the table if you have a decent profit
Same thing with Marex (MRX), which looks good but wobbled a touch after a nice move into round-number resistance near 50. We’re OK selling some and holding the rest through earnings (due next Thursday).
Full Sells
Argenx (ARGX) – one of the names that rounded out nicely on the chart during the past couple of months, but fell apart this week (before and after earnings) after approaching its old high
BellRing Brands (BRBR) – cracked on earnings after testing new highs
MurphyUSA (MUSA) – another earnings loser
TG Therapeutics (TGTX) – looked great but the double top after earnings is ominous.
SUGGESTED STOPS
ADMA Biologics (ADMA) near 19.5
Ascend Pharma (ASND) near 154
Expand Energy (EXE) near 101
Fortinet (FTNT) near 94
Insulet (PODD) near 256
Monster Beverage (MNST) near 57
Nutrien (NTR) near 52
Planet Fitness (PLNT) near 92
Take-Two Interactive (TTWO) near 194
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