It’s been a solid, steady post-holiday week for the market, with the major indexes generally flat (small and mid-caps) to up (S&P 500 and Nasdaq) 1% or so. That keeps the intermediate-term trend pointed solidly up, with all indexes we track a few percent above their 50-day lines.
The action of leading growth stocks is also encouraging, and this really goes back to the initial vaccine news on November 9. That revelation caused a wicked rotation out of growth stocks, but since then, while there have been some mild tremors, we haven’t seen any decisive follow-on rotation. In fact, we’re seeing more and more strength across the board, with cyclical-type names remaining strong while more and more growth-y stocks perk up (including a few that popped after earnings yesterday).
Bigger picture, then, we remain bullish—when it comes to the overall market, both the trends and many indicators that focus on unusual strength point to higher prices in the months down the road. And we’re glad to see the buying pressures gradually spread during the past couple of weeks while the sellers have been unable to get much of a foothold.
About the only worrisome thing is … there isn’t much to worry about. Most of the news has turned positive (vaccine, GDP growth, most economic reports, etc.), which has evidently caused many investors to hop on the train—whether you’re looking at money flows, options activity, surveys or action in speculative stocks, it’s clear that investors are getting giddy.
Of course, sentiment is very inexact, so we rarely trade on it. But usually, when there isn’t much to worry about, the market will soon find something to worry about out of left field. It’s a good reason to be discerning on the buy side, focusing on strong charts and good entry points.
Still, overall, there’s no question the vast majority of the evidence is bullish, so you should be, too.
SUGGESTED BUYS
Axon Enterprise (AAXN) has now sat in a tight range for four weeks since its earnings gap to new price and relative performance highs. A bit more weakness could come, but anything approaching the 25-day line (at 119 and rising) would be tempting, with a stop around 109.
On the cyclical side of things, Norfolk Southern (NSC) has now grudgingly pulled in about 10 points after a huge 55-point rally from late October to mid-November. Taking a swing at it around here with a stop in the low 220s seems like a solid risk/reward.
SUGGESTED SELLS
First off, don’t forget to take some partial profits if you’ve gotten some windfall gains in just a few weeks. General Motors (GM) is a good example—the stock looks and acts great, but it’s also up around 30% just since the start of November. Ring the register on a few shares and let the rest ride.
As for outright sells, we have four today:
Brinker Int’l (EAT)
Five9 (FIVN)
Seres Therapeutics (MCRB)
Staar Surgical (STAA)
SUGGESTED STOPS
Align Technology (ALGN) near 415
Avalara (AVLR) near 152
Carrier Global (CARR) near 34
Exact Sciences (EXAS) near 116
Freeport McMoRan (FCX) near 19.5
Freshpet (FRPT) near 122
HubSpot (HUBS) near 329
Invitae (NVTA) near 45
JD.com (JD) near 82
Martin Marietta (MLM) near 255
Natera (NTRA) near 76
Paycom Software (PAYC) near 375
Qualcomm (QCOM) near 132
Quanta Services (PWR) near 62.5
Shift4 Payments (FOUR) near 55
Square (SQ) near 177
STMicroelectronics (STM) near 35
Taiwan Semi (TSM) near 90
Target (TGT) near 164
Zillow (Z) near 100