After weeks on the upside, the market has finally hit a bit of a pothole over the past few days, with some up-down-up-down action coming since Wednesday. The action isn’t a total shock given the elevated sentiment and the fact that most stocks are stretched to the upside.
Bigger picture, the wobbles haven’t changed the overall outlook—when you’re looking at the major trends of the indexes or leading stocks, some of the big-picture blastoff-type indicators that flashed a month ago or the sheer number of stocks headed higher, it all points to higher prices down the road. We remain mostly bullish.
That said, in the near term, the market’s path is probably more of a coin flip; the upside momentum is strong, so continued gains are certainly possible, but the market usually has a way of throwing investors curveballs when sentiment gets complacent. Plus, we’ll see how the recent up-down action goes—if it lasts a few days, it can be a sign that the sellers are finally putting up a fight.
Still, we’re not really changing our game plan. Because of the key primary evidence (bullish), we’re still in a buying mood—our Market Monitor will remain at a level 7 (possibly 8 if we see some solid entry points emerge). But as has been the case for a few weeks, we think being discerning and keeping your feet on the ground is key—looking for at least half-way decent entry points, honoring stops and taking partial profits on the way up all make sense.
SUGGESTED BUYS
Canopy Growth (CGC) looks like it’s emerged from a multi-year downtrend, with great upside power since early November. So far this month, it’s hesitated as the 25-day line (now at 26 and rising quickly) catches up. Nibbling here or on dips should work, though use a loose initial loss limit in the 22.5 to 23 area.
SunPower (SPWR) has had a big run since July, so there is risk up here, but the stock’s latest pullback began in late November and has brought it down to its 25-day line. We’re OK taking a swing at it around here with a stop just under 19.
SUGGESTED SELLS
Martin Marietta (MLM) – can’t get going even with excellent performance from cyclical stocks. What happens when those names pull back?
Natera (NTRA) – been running for months and is now moving out of trend on the upside. If you’d prefer to just trail a stop, you can, possibly in the mid 80s. But we’ll book our big profit.
Omnicell (OMCL) – getting bought out, so we’ll take the quick profit off the table.
STMicroelectronics (STM) – abnormal gap down on earnings warning, also tripped our 35 stop.
SUGGESTED STOPS
Align Technology (ALGN) near 430
Avalara (AVLR) near 155
Carrier Global (CARR) near 34.5
Exact Sciences (EXAS) near 117
Freeport McMoRan (FCX) near 20.5
Freshpet (FRPT) near 124
General Motors (GM) near 39
HubSpot (HUBS) near 342
Huazhu Group (HTHT) near 45
Invitae (NVTA) near 48
Marvell Tech (MRVL) near 41.5
Moderna (MRNA) near 133
Paycom Software (PAYC) near 380
Qualcomm (QCOM) near 135
Quanta Services (PWR) near 64
Shift4 Payments (FOUR) near 56
Square (SQ) near 182
SunPower (SPWR) near 18.7
Taiwan Semiconductor (TSM) near 91
Target (TGT) near 164
Zillow (Z) near 104