Last week’s market bounce was encouraging but inconclusive—the major indexes rallied at a key level, and many leading (and potential leading) stocks did the same. That said, at best, most things were still stuck in neutral, with few names really powering ahead and the indexes still in intermediate-term downtrends.
This week, though, looks better—as of this morning, the big-cap indexes are standing north of their 50-day lines; some broader indexes (NYSE Composite, S&P 400 MidCap) are actually close to their highs and, most important to us, we’re seeing more growth stocks let loose on the upside. We’re also impressed that, for the first time in what seems like ages, the market is rallying in unison, as opposed to the rotational ways of recent months.
To be clear, the past two weeks of action doesn’t erase all of the market’s sins. We’re still not seeing a ton of names break out on the upside, the intermediate-term trend of the indexes is more neutral than positive and earnings season is just getting underway, which can always change the landscape. Those are good reasons to wade back into the market in a step-by-step fashion—if this rally is the real deal (especially for growth stocks), it won’t end after just a couple of weeks.
But we’re not trying to throw cold water on the action: Simply put, the evidence is growing that the market’s correction is over (or close to over) and that growth stocks are leading the way. We’re likely to bump up our Market Monitor to a level 7 come Monday.
Suggested Buys
Datadog (DDOG) held up well during the two legs down in September and early October, and two days ago it surged to new highs on good volume. We don’t consider this a breakout, per se (the stock had only been consolidating a couple of weeks), but it’s a good sign the uptrend is in good shape. Dips into the high 140s would be tempting, with a stop in the 130 area.
Pure Storage (PSTG) hasn’t done anything since we wrote about it in mid-September, but we still think it looks good—the stock has effectively rested for a month after a huge-volume earnings move in late August. We think it’s buyable around here with a stop around 23.5.
Suggested Sells
If you just bought some energy names recently and have been gifted quick gains, it’s not the worst idea to take partial profits. APA Corp. (APA) is a good example, with the stock running 15% to 20% in just three weeks from our writeup; consider selling a few shares and holding the rest with a trailing stop.
Catalent (CTLT) – no bounce, under 50-day line
Lululemon (LULU) – tripped stop
Synaptics (SYNA) – tripped stop
Suggested Stops
Alkermes (ALKS) near 30
APA Corp. (APA) near 22.5
Avis Budget (CAR) near 123
Beauty Health (SKIN) near 23.5
Bill.com (BILL) near 258
Biohaven Pharm (BHVN) near 127
Brooks Automation (BRKS) near 98
Builders FirstSource (BLDR) near 52.5
Celsius Holdings (CELH) near 84
Chart Industries (GTLS) near 182
Horizon Therapeutics (HZNP) near 107
ICU Medical (ICUI) near 225
KKR & Co. (KKR) near 63
LendingClub (LC) near 28
Macy’s (M) near 22
Palo Alto Networks (PANW) near 455
Paycom Software (PAYC) near 465
Pure Storage (PSTG) near 23.5
Snap Inc. (SNAP) near 72
Teck Resources (TECK) near 25.5