It’s been mostly another rotational week, with investors rotating out of some of the recently strong tech and cloud areas and back into some cyclical areas (especially metals and financials). That said, you didn’t see much in the indexes—all the major ones are up or down within one percent on the week coming into today, but the more focused indexes tell the tale, with things like the ARK Innovation Fund (ARKK) and the Russell 2000 Growth Index (IWO) down nearly 1%, while materials (up 5.6%) and financials (up 2.7%) power ahead.
Still, while we did see a bit of intermediate-term abnormal action out there, most growth stocks look fine and a few have ignored the rotation entirely. In fact, we’d go so far as to say that if this rotation stays reasonable for a couple more days and growth stocks find strong buying, it could offer up some solid entry points and leaders bounce off solid support levels.
For now, though, this week’s action represents more of the same—we still see many names that have popped out of ranges (including the aforementioned cyclical names that are now reasserting themselves), but the action is full of speedbumps, which will often produce a situation where a stock makes no net progress for many weeks before embarking on its next rally.
Thus, we’re sticking with the same general stance—you can slowly extend your line given the increase in good-looking stocks and earnings winners, but it’s still important to go slow and try to buy on dips, and when you latch onto a name that has a nice run for a few weeks to consider booking some partial profits. If the selling/rotation accelerates we could change our tune, but right now we’re comfortable leaving our Market Monitor at a level 7.
Suggested Buys
Dexcom (DXCM) broke out powerfully a couple of weeks ago and notched a total of 12 weeks up in a row, which usually bodes well down the road. Now the stock has pulled in some, which we think is a solid risk-reward entry point—we’re OK buying somewhere with a 10%-ish loss limit.
DocuSign (DOCU) hasn’t done much for the past few weeks as its moving averages are catching up. If you don’t own any, we’re OK taking a stab at it here with a stop in the upper 260s, well below the 50-day line.
Synaptics (SYNA) gapped up nicely off its 50-day line to new highs on earnings last Friday and has held very tight this week despite all of the market’s crosscurrents. Some dips are possible, but we’re OK buying some here or on dips, with a stop in the low/mid-150s.
Suggested Sells
Partial profits:
Morgan Stanley (MS) – not the biggest profit or fastest mover but taking a few chips off the table here makes sense, chart-wise.
Outright sells:
Arvinas (ARVN) – has given up most of its recent pop
BioCryst Pharmaceuticals (BCRX) – tripped stop
BioNTech (BNTX) – if you want to trail a tight stop, that’s fine, but the stock looks blowoff-ish to us. We’ll take our quick profit and move on.
Suggested Stops
Advanced Micro Devices (AMD) near 102
American Eagle (AEO) near 32.5
Antero Resources (AR) near 12.8
Alnylam Pharm (ALNY) near 180
Ares Management (ARES) near 64.5
Arista Networks (ANET) near 360
ASML Holding (ASML) near 717
Atlassian (TEAM) near 295
Bath & Body Works (BBWI) near 58.5. NOTE: This is the “new” L Brands (formerly LB) as the spin-off was completed.
Bentley Systems (BSY) near 59
Bill.com (BILL) near 186
Burlington Stores (BURL) near 330
CrowdStrike (CRWD) near 239
Hilton Worldwide (HLT) near 120
Horizon Therapeutics (HZNP) near 99
HubSpot (HUBS) near 595
Lightspeed POS (LSPD) near 85
Nutanix (NTNX) near 35.5
Shopify (SHOP) near 1455
Snap (SNAP) near 72
Sprout Social (SPT) near 91
Synaptics (SYNA) near 153
Tempur Sealy (TPX) near 40.5
Trane Technologies (TT) near 188
Zscaler (ZS) near 224